Lawyers, other representatives, expert(s), tribunal’s secretary

Award

Defined Terms
Argentine Economic Turmoil The economic turmoil experienced by Argentina during late-2001 and early-2002
Argentina-France BIT (or Treaty) The agreement between the Government of the French Republic and the Government of the Argentine Republic on the Encouragement and Reciprocal Protection of Investments, signed on 3 July 1991
Argentina-Luxembourg BIT The agreement between the Government of the Argentine Republic and the Belgian/Luxembourg Economic Union on the Encouragement and Reciprocal Protection of Investments, signed on 28 June 1990
Bidding Terms The bidding terms published on 23 February 1998
Comments on Quantum The Parties comments of 15 November 2010 regarding the supplementary expert reports on quantum
Concession Agreement Concession agreement between the Government of Mendoza and EDEMSA, signed on 15 July 1998
Convertibility Law Collectively referring to Federal Law No. 23,928 and its implementing National Decree No. 2,128
Cost Adjustment Clause Contract clause establishing the periodic adjustment of tariff rates to account for the inflation of electricity distribution costs
Currency Clause Concession clause prescribing the calculation of costs in terms of U.S. dollars for purposes of assessing the ultimate tariff to be invoiced to consumers; Concession Anexo II, Subanexo 2
DAV Distribution-added value
EDEMSA Empresa Distribuidora de Energía de Mendoza S.A.
EDESTESA Empresa Distribuidora de Electricidad de Este S.A.
EDF Électricité de France
EDFI EDF International S.A.
Emergency Tariff Measures Articles 8 through 10 of Federal Law No. 25,561

 

EMSE The formerly state-owned electricity distributor, Energía Mendoza Sociedad de Estado
EPRE The independent regulatory agency known as Ente Provincial Regulador de la Electricidad
Extraordinary Review Interim tariff schedule review pursuant to Article 48 of Mendoza Provincial Law No. 6,497
First Session The first session held at the seat of the Centre in Washington, D.C. on 1 September 2004
First Session Timetable The timetable adopted for the submission of pleadings and the presentation of oral arguments
GEMSA Generación Eléctrica de Mendoza
ILC Articles 2001 International Law Commission‘s Draft Articles on Responsibility of States for Internationally Wrongful Acts
Info Memo The information memorandum distributed by Chase Manhattan Bank and Salomon Smith Barney in February 1998
Initial Tariff Schedule The initial fixed-term tariff schedule established under Article 25 and described in Subanexo 3 of the concession agreement entered between the Government of Mendoza and EDEMSA
ICSID Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings
Institutional Rule ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings
JL&A Report The report prepared by EPRE on the advice of Consultancy Jorge Lapeña y Asociados S.A.
LECG Law & Economics Consulting Group (Claimants‘ Experts)
LECOPS Letras de Cancelación de Obligaciones Provinciales or "Notes for the Cancellation of Provincial Obligations"
León León Participaciones Argentinas S.A.
Letter of Understanding Letter of 7 April 2005 between Province of Mendoza and EDEMSA concerning DAV increase

 

 

MBG Molina, Bello & González (Respondent‘s Experts)
ME&PW Ministry of the Environment and Public Works
MEM Electricity Wholesale Market
MFN Clause The most-favored-nation clause found in Article 4 of the Argentina-France BIT
National Emergency Law Federal Law No. 25,561
Network-Use Fee Fee for use of the network applicable to large electricity users
Nihuil IV Contract The contract for the construction, operation and maintenance of a hydroelectric power plant known as NIHUIL IV
Ordinary Review The scheme in which successive tariff schedule reviews would be conducted pursuant to Article 47 of Provincial Law No. 6,497
PETROMS Notes issued by the Mendoza government‘s treasury
Pre-Emergency Measures affecting the Concession Regulatory measures adopted prior to the national and provincial measures adopted prior to the national and provincial emergency laws of 2002
Provincial Province of Mendoza, unless otherwise stated
Provincial Electricity Law Mendoza Provincial Law No. 6,497
Provincial Emergency Law Mendoza Provincial Law No. 6,976
PTC Fund The Provincial Tariff Compensation Fund established under Articles 74 and 75 of Provincial Law No. 6,497
Regulatory Framework Collectively referring to Provincial Laws No. 6,497 and No. 6,498
Renegotiation Commission Renegotiation Commission of the Public Utilities Agreements

 

 

Renegotiation Process Renegotiation of the EDEMSA Concession Agreement
Request of 16 June Claimants‘ request for arbitration of 16 June 2003
SAURI SAUR International S.A.
Scattered Market The scattered electricity market comprising of users that are located in distant regions
SPA Share Purchase Agreement, dated 30 June 2004, between EDFI and IADESA
T-1 Tariff No. 1 under Anexo II, Subanexo 1, Chapter 1 of the Concession Agreement
T-2 Tariff No. 2 under Anexo II, Subanexo 1, Chapter 1 of the Concession Agreement
Tariff Schedule The tariff schedule set forth under Anexo II, Subanexo 1 of the Concession Agreement between the Government of Mendoza and EDEMSA
Transformation Law Provincial Law No. 6,498
U.S. CPI U.S. consumer price index published by the U.S. Bureau of Labor Statistics
U.S. PPI U.S. producer index published by the U.S. Bureau of Labor Statistics
UTN Report Study on the Concession Agreement conducted by EPRE‘s independent expert, Universidad Tecnológica Nacional - Regional Tucumán
Vienna Convention 1969 Vienna Convention on the Law of Treaties
2002 Monetary Measures Articles 3 through 5 of Federal Law No. 25,561
2002 Public Hearing The public hearing held by EPRE on 13 December 2002

 

Key Written and Oral Pleadings

Initial

• Request of 16 June (16 June 2003)

• Amended Request (4 August 2003)

Jurisdiction

• Respondent‘s Memorial on Objections to Jurisdiction (15 July 2005)

• Claimants‘ Counter Memorial on Jurisdiction (3 October 2005)

• Respondent‘s Reply on Jurisdiction (17 November 2005)

• Claimants‘ Rejoinder on Jurisdiction (13 January 2006)

• Hearing on Jurisdiction (8 March 2006)

• Claimants‘ Post-Hearing Brief on Jurisdiction (20 March 2006)

• Respondent‘s Observations to Claimants‘ Post-Hearing Brief on Jurisdiction (6 April 2006)

Merits

• Claimants‘ Memorial on the Merits (2 May 2005)

• Respondent‘s Counter-Memorial on the Merits (26 January 2009)

• Claimants‘ Reply on the Merits (30 April 2009)

• Respondent‘s Rejoinder on the Merits (27 July 2009)

• Hearings on the Merits (1-3 October 2009; 2-7 November 2009)

• Claimants‘ Post Hearing Brief on the Merits (14 December 2009)

• Respondent‘s Post-Hearing Brief on the Merits (14 December 2009)

• Claimant‘s Reply Post Hearing Brief on the Merits (8 January 2010)

• Respondent‘s Reply Post Hearing Brief on the Merits (8 January 2010)

Quantum

• Claimants‘ LECG Report (28 April 2005)

• Respondent‘s MBG Report (9 January 2008)

• Claimants‘ LECG Supplemental Report (30 April 2009)

• Respondent‘s MBG Supplemental Report (20 July 2009)

• Claimants‘ Supplementary Expert Report on Quantum (24 September 2010)

• Respondent‘s Supplementary Expert Report on Quantum (24 September 2010)

• Respondent‘s Report on the Valuations Performed by LECG (10 November 2010)

• Claimants‘ Supplementary Report on Quantum: Comments to Argentina‘s Valuation Experts‘ Report (15 November 2010)

• Claimants‘ Comments on Quantum (15 November 2010)

• Respondents Comments on Quantum (15 November 2010)

• Expert Report of Mr. Reos (10 November 2010)

• Expert Reports of Messrs. Garcia and Guidi (11 November 2010)

• Hearing on Quantum (14 February 2011)

• Claimants‘ Post-Hearing Brief on Quantum (11 March 2011)

• Respondent‘ s Post-Hearing Brief on Quantum (11 March 2011)

Chronology of Events Related to Arbitrator Challenges

• Respondent proposes to disqualify Dr. de Trazegnies (22 June 2006)

• Dr. de Trazegnies resigned (7 July 2006)

• Centre notified Tribunal‘s acceptance of Dr. de Trazegnies‘s resignation (20 July 2006)

• Respondent appointed Professor Jesús Ramón (26 September 2006)

• Professor Jesús Ramón accepted his appointment (17 October 2006)

• Respondent challenged appointment of Professor Kaufmann-Kohler (29 November 2007)

• Professor Kaufmann-Kohler provided explanation to address disqualification (21 December 2007)

• Tribunal rejected challenge and lifted suspension of the proceeding (25 June 2008)

Principal Tribunal Decisions and Orders

Procedural Orders in Chronological Order

• Procedural Order No. 1 establishing the schedule of pleadings on the merits (13 August 2008)

• Procedural Order No. 2 concerning document production (22 October 2008)

• Procedural Order No. 3 concerning document production (4 December 2008)

• Procedural Order No. 4 concerning document production (19 February 2009)

• Procedural Order No. 5 concerning document production (22 April 2009)

• Procedural Order No. 6 concerning the parties‘ motions to strike evidence (19 March 2011)

Decision on Professor Kaufmann-Kohler (21 December 2007)

Decision on Jurisdiction (5 August 2008)

Witnesses and Experts

Witnesses On Behalf of Claimants

1. Philippe Barthel

a. First Statement (22 April 2005)

b. Supplementary Statement (22 April 2009)

2. Carlos Birr Meza

a. First Statement (15 April 2005)

b. Supplementary Statement (28 April 2009)

3. Patrick Blandin

a. First Statement (25 April 2005)

b. Supplementary Statement (23 April 2009)

4. Michel Cavé, Statement (27 April 2009)

5. Serge Caubet, Statement (21 April 2009)

6. Jack Cizain, Statement (15 April 2005)

7. Héctor Alberto Gonella

a. First Statement (29 April 2005)

b. Supplementary Statement (30 April 2009)

8. Didier Lamèthe

a. First Statement (25 April 2005)

b. Supplementary Statement (12 April 2009)

9. Alejandro Neme, Statement (20 April 2005)

10. Bruno Nitrosso, Statement (2 May 2005)

Experts On Behalf of Claimants

1. Ricardo Héctor Arriazu

a. Expert Report (29 April 2005)

b. Supplementary Report (27 April 2009)

2. Carlos Manuel Bastos

a. Expert Report (27 April 2005)

b. Supplementary Report (25 April 2009)

3. Alberto B. Bianchi

a. Expert Report (29 April 2005)

b. Supplementary Report (25 April 2009)

4. Rudolf Dolzer

a. Expert Report (29 April 2005)

b. Supplementary Report (17 April 2009)

5. Manuel A. Abdala and Mr. Pablo T. Spiller of LECG

a. First Report (28 April 2005)

b. Second Report (30 April 2009)

c. Third Report (24 September 2010)

d. Fourth Report (15 November 2010)

Witnesses On Behalf of Respondent

1. Raúl Faura

a. First Statement (5 January 2008)

b. Rebuttal Statement (24 July 2009)

2. Daniel E. Fernández

a. First Statement (1 December 2008)

b. Rebuttal Statement (20 January 2009)

3. Héctor Manuel Laspada

a. First Statement (9 January 2008)

b. Rebuttal Statement (20 July 2009)

4. Eduardo A. Ratti

a. First Statement (15 November 2008)

b. Rebuttal Statement (27 July 2009)

5. César Hugo Reos

a. First Statement (5 January 2009)

b. Rebuttal Statement (20 July 2009)

c. Supplementary Statement (10 November 2010)

6. Sergio Isabelino Rodríguez

a. First Statement (10 January 2009)

b. Rebuttal Statement (21 July 2009)

Experts On Behalf of Respondent

1. Augusto César Belluscio (15 July 2009)

2. Gerardo E. Bozovich (25 July 2009)

3. Liliana De Riz (12 November 2008)

4. Claudio García and Jorge Guidi (11 November 2010)

5. Roberto Frenkel and Mario Damill

a. First Report (6 January 2008)

b. Supplementary Report (11 July 2008)

6. Ismael Mata

a. First Report (22 January 2009)

b. Supplementary Report (20 July 2009)

7. Federico Molina, Fabián Bello, Daniel González, Darío Quiroga

a. First Report (9 January 2008)

b. Supplementary Report (20 July 2009)

c. Third Report (23 September 2010)

d. Fourth Report (10 November 2010)

8. Mónica Pinto (16 July 2009)

9. Nouriel Roubini (6 January 2009)

10. Alejandro Sruoga

a. First Report (29 December 2008)

b. Supplementary Report (20 July 2009)

Introduction

2.
The underlying claims of treaty violation were filed at the International Centre for Settlement of Investment Disputes ("ICSID" or "Centre") in Washington, D.C., pursuant to the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States ("ICSID Convention") which entered into force in Argentina on 18 November 1994 and in France on 20 September 1967, as well as the ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings ("Institution Rules") as amended on 1 January 2003, and the ICSID Rules of Procedure for Arbitration Proceedings ("ICSID Arbitration Rules") also as amended on 1 January 2003.
3.
This proceeding was commenced by three Claimants: (i) EDF International S.A. ("EDFI"), a company incorporated and headquartered in France that holds overseas-investment assets of its wholly-owning parent, Électricité de France ("EDF"), a power company likewise incorporated and headquartered in France; (ii) SAUR International S.A. ("SAURI"), also a company incorporated and headquartered in France that specializes in providing water and energy services around the world; and (iii) León Participaciones Argentinas S.A. ("León"), a company incorporated and headquartered in Luxembourg that was originally created as a wholly-owned subsidiary of Crédit Lyonnais, a company incorporated and headquartered in France, but that was later acquired by Claimant EDFI on 12 March 2004.
4.
Respondent is the Argentine Republic ("Argentina") to which is attributed the sovereign acts of its provincial territory, the Province of Mendoza as well as those of the provincial regulatory agencies acting on behalf of the Government of Mendoza.
5.
The Arbitral Tribunal ("Tribunal") has been duly constituted by Professor Gabrielle Kaufmann-Kohler by appointment of Claimants, and Professor Jesús Remón by appointment of Respondent, as Arbitrators, and Professor William W. Park by appointment of the Chairman of the Administrative Council pursuant to Article 38 of the ICSID Convention, as President of the Tribunal.
6.
Jurisdiction was addressed on a preliminarily bifurcated basis. A hearing was held on 8 March 2006 and a Decision was rendered on 5 August 2008 confirming the Tribunal‘s jurisdiction. For purposes of pleadings and oral arguments, this proceeding was further bifurcated into merits and quantum phases. A hearing on the merits was held between 1 and 3 October 2009, which continued from 2 thru 7 November 2009, and on quantum on 14 February 2011. All hearings were held at the seat of the Centre in Washington, D.C.
7.
The Tribunal renders this Award to dispose of all issues related to the merits and quantum of this arbitration, registered at the Centre as ICSID Case No. ARB/03/23.

I. PROCEDURAL HISTORY

A. CONSTITUTION OF THE TRIBUNAL AND PROCEDURES

8.
On 16 June 2003, the Centre received a request for arbitration ("Request of 16 June") against Respondent filed by Claimants EDFI and SAURI. In accordance with Article 36(3) of the ICSID Convention, the Acting Secretary-General of the Centre ("Acting Secretary-General") on even date registered the Request of 16 June as ICSID Case No. ARB/03/23.1 The next day, pursuant to Institution Rule 5 the Centre acknowledged receipt of the Request of 16 June and transmitted copies thereof to Respondent and to the Argentine Embassy in Washington, D.C.
9.
On 4 August 2003, the Centre received an amended request for arbitration ("Amended Request") joining León as an additional claimant to the Request of 16 June. Claimant León is said to be an assignee of the investment made in Argentina by its French parent company, Crédit Lyonnais, and hence, has standing to file arbitrations under the Argentina-France BIT. See Amended Request footnote 1. Nevertheless, to the extent its Luxembourgian corporate nationality is found to preclude standing, León invokes provisions of the Agreement between the Government of Argentina and the Belgian/Luxembourg Economic Union for the Promotion and Reciprocal Protection of Investments, signed on 28 June 1990 and which entered into force on 20 May 1995 ("Argentina-Luxembourg BIT").
10.
On 7 August 2003, pursuant to Rule 5 of the Institution Rules, the Centre acknowledged receipt of the Amended Request and transmitted copies thereof to Respondent and to the Argentine Embassy in Washington, D.C.
11.
On 12 August 2003, the Acting Secretary-General registered the Amended Request pursuant to Article 36(3) of the ICSID Convention as ICSID Case No. ARB/03/23 under the formal heading, EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic. In accordance with Institution Rule 7, on even date the Parties were notified of the registration and were invited to proceed, as soon as possible, with the constitution of the tribunal.
12.
On 31 October 2003, Claimants filed a letter requesting that the tribunal be constituted pursuant to ICSID Convention Article 37(2)(b), which prescribes one arbitrator to be appointed by each side and the third arbitrator by agreement of the Parties. By the same letter, Claimants appointed as Arbitrator, Professor Gabrielle Kaufmann-Kohler, a national of Switzerland. Per ICSID Arbitration Rule 2(3), the Acting Secretary-General confirmed by letter dated 3 November 2003 the application of ICSID Convention Article 37(2)(b).
13.
On 26 January 2004, Claimants filed a letter on account of the fact that ninety days had elapsed since the case was registered on 12 August 2003 without any tribunal being constituted, and therein invoked ICSID Convention Article 38 as well as ICSID Arbitration Rule 4(4) to request the Chairman of the Administrative Council to appoint and fill the respective vacancies.
14.
On 24 March 2004, Respondent appointed as Arbitrator, Dr. Fernando de Trazegnies, a national of Peru.
15.
On 18 May 2004 the Chairman of the Administrative Council appointed Professor William W. Park, a national of the United States of America ("U.S."), to serve as President of the Tribunal.
16.
On 2 June 2004, the Acting Secretary-General notified the Parties pursuant to ICSID Arbitration Rule 6(1) that all three arbitrators had accepted their appointments, thereby formally commencing the proceeding, and that ICSID Senior Counsel Mr. Gonzalo Flores would serve as Secretary of the Tribunal ("Secretary"). Since 9 December 2009, ICSID Consultant Ms. Anneliese Fleckenstein has continued to serve as Secretary.2
17.
On 1 September 2004, a first session was held at the seat of the Centre in Washington, D.C. ("First Session").
18.
Present on behalf of Claimants included (i) Mr. Didier Lamèthe from EDF; and (ii) Mr. Ronald E. M. Goodman, Mr. Paolo Di Rosa and Ms. Gaela Gehring Flores from the law firm, WHITE & CASE.3 On behalf of Respondent attended (i) Drs. Cintia Yaryura and Juan José Galeano from the PROCURACIÓN DEL TESORO DE LA NACIÓN; and (ii) Drs. Marcelo A. Massoni and Roberto Hermida from the Argentine Embassy in Washington, D.C.
19.
During the First Session the Parties agreed on a number of procedural matters reflected in the meeting minutes signed by the President of the Tribunal and the Secretary. A timetable was adopted for the submission of pleadings and the presentation of oral arguments ("First Session Timetable"), pursuant to which Claimants would file a memorial on the merits no later than 30 April 2005. With respect to the latter stages, the First Session Timetable was designed to be contingent upon whether Respondent challenged arbitral authority, which if so it would be required to submit a memorial on objections to jurisdiction by 15 July 2005.
20.
On 2 May 2005, Claimants filed their Memorial on the Merits.

B. JURISDICTIONAL PHASE

21.
Per the First Session Timetable, Respondent filed its Memorial on Objections to Jurisdiction on 15 July 2005. Consequently, the merits phase of the proceeding was suspended on 15 July 2005as prescribed by ICSID Arbitration Rule 41(3).
22.
On 12 August 2005, Claimants informed the Centre that Drs. Michael R. Rattagan and Ricardo Barreiro Deymonnaz from the Argentine law firm, RATTAGEN, MACCHIAVELLO, AROCENA & PEÑA ROBIROSA, ABOGADOS, would act as co-counsel for Claimants.
23.
In accordance with the First Session Timetable, Claimants filed their Counter-Memorial on Jurisdiction on 3 October 2005. Subsequently, Respondent filed its Reply on Jurisdiction on 17 November 2005, and Claimants their Rejoinder on Jurisdiction on 13 January 2006.
24.
On 8 March 2006, a hearing on jurisdiction was held at the seat of the Centre in Washington, D.C.
25.
Present on behalf of Claimants were (i) Mr. Didier Lamèthe from EDFI, and (ii) Messrs. Ronald E. M. Goodman, Paolo Di Rosa, Tomás Leonard, A. Manuel García, and Kelby Ballena from the law firm, WINSTON & STRAWN. On behalf of Respondent attended Drs. Adolfo Gustavo Scrinzi, Gabriel Bottini, Florencio Travieso, and María Luz Moglia from the PROCURACIÓN DEL TESORO DE LA NACIÓN.
26.
On 20 March 2006, Claimants submitted their post hearing brief on jurisdiction. Respondent filed its observations thereto on 6 April 2006.
27.
On 22 June 2006, Respondent proposed the disqualification of its own party-appointed arbitrator, Dr. de Trazegnies, which prompted his resignation through a letter dated 7 July 2006. On 20 July 2006, the Centre notified the Parties that the President of the Tribunal and Arbitrator Kaufmann-Kohler had considered and consented to the resignation of Dr. de Trazegnies, and invited Respondent to appoint a replacing arbitrator.
28.
On 26 September 2006, Respondent appointed Professor Jesús Remón, a national of Spain. By letter dated 17 October 2006, Professor Remón accepted his appointment, thereby resuming the proceeding, and conveyed it was unnecessary to recommence oral procedures as permitted but not required by ICSID Arbitration Rule 12.
29.
A second challenge by Respondent was raised on 29 November 2007, this time proposing the disqualification of Claimants‘ party-appointed arbitrator, Professor Kaufmann-Kohler. In accordance with ICSID Arbitration Rule 9(3), on 21 December 2007 Professor Kaufmann-Kohler furnished explanations addressing Respondent‘s disqualification proposal. Thereafter, the Parties exchanged observations on the matter. On 25 June 2008, the President of the Tribunal and Arbitrator Remón concluded Professor Kaufmann-Kohler was capable of exercising independent judgment as required under ICSID Convention Article 14(1), and thus, rejected Respondent‘s challenge and effectively lifted the suspension on the proceeding.
30.
On 5 August 2008, the Tribunal, duly comprised of Professors Kaufmann-Kohler and Remón as Arbitrators and Professor Park as President of the Tribunal, issued its Decision on Jurisdiction holding that (i) the Tribunal possesses authority to hear the claims set forth in Claimants‘ Memorial; (ii) any allocation of costs related to the jurisdiction phase would be addressed as part of an Award on the merits and quantum; and (iii) procedural aspects of further proceedings would be addressed in a subsequent procedural order.

C. MERITS PHASE

31.
On 13 August 2008, the Tribunal issued Procedural Order No. 1 and established therein a timetable for submitting pleadings concerning the merits phase of this proceeding. On 22 October 2008, the Tribunal, in consultation with the Parties, fixed the venue and dates for the hearing on the merits.
32.
In accordance with Procedural Order No. 1, Respondent filed its Counter-Memorial on the Merits on 26 January 2009, an English translation of which is dated 9 February 2009.4 Subsequently, Claimants filed their Reply on the Merits on 30 April 2009, and Respondent its Rejoinder on the Merits on 27 July 2009.
33.
A hearing on the merits was held at the seat of the Centre in Washington, D.C., between 1 and 3 October and continued on 2 thru 7 November 2009.
34.
Present on behalf of Claimants were (i) Mr. Charles-Henri Prou, Mr. Jean-Paul Palma and Ms. Laure Perrin from EDFI; (ii) Mr. Paolo Di Rosa, Ms. Jean Kalicki, Ms. Mara Senn, Mr. A. Manuel Garcia, Mr. Pablo Valverde, Mr. Patricio Grane, Ms. Cristina Sorgi, Mr. Wells Bennett, Ms. Suzana Medeiros Blades, Mr. Rodrigo Gil, Ms. Paloma Gomez, Mr. Rodolfo Fuenzalida, Mr. Kelby Ballena, Ms. Vanessa Mueller and Ms. Rosario Cornejo from ARNOLD & PORTER; and (iii) Drs. Ricardo Barreiro Deymonnaz Rattagan, and Juan Pablo De Luca from RATTAGAN, MACCHIAVELLO, AROCENA & PEÑA ROBIROSA, ABOGADOS.
35.
On behalf of Respondent attended (i) Dr. Osvaldo César Guglielmino, Procurador del Tesoro de la Nación; (ii) Dr. Gabriel Bottini, Dr. Ignacio Pérez Cortés, Dr. Javier Pargament Mariasch, Dr. Alejandra Mackluf Faelli, Dr. Facundo Pérez Aznar, Dr. María Soledad Romero Caporale, Dr. Cintia Yaryura, Dr. Nicolás Grosse, and Dr. Nicolás Duhalde from the PROCURACIÓN DEL TESORO DE LA NACIÓN; and (iii) Dr. Ignacio Torterola from the Argentine Embassy in Washington, D.C.
36.
On 14 December 2009, Claimants and Respondent filed post-hearing briefs on the merits. Subsequently on 8 January 2010, the Parties, also simultaneously, submitted replies to each other‘s Post Hearing Brief on the Merits.

D. FURTHER CONSIDERATION OF QUANTUM

37.
On 9 July 2010, the Tribunal invited each side to submit supplementary expert reports on the quantum of damages and comments of counsel on the other side‘s as well as each side‘s own supplementary expert reports.
38.
Accordingly on 24 September 2010, each side submitted a supplementary expert report on quantum. On 15 November 2010, the Parties filed comments on the supplementary reports prepared by their own as well as by the other side‘s experts ("Comments on Quantum").
39.
Respondent also submitted a supplementary statement by Mr. Reos dated 10 November 2010 and a new expert report by Messrs. García and Guidi dated 11 November 2010, both sent on 15 November 2010. On 19 November 2010 Claimants applied to declare the statement and report inadmissible. Respondent on 13 December 2010 moved to exclude certain sections of the LECG reports of 24 September and 15 November 2010.
40.
The Tribunal declined to grant Claimants‘ application and declared Respondent‘s motion moot, confirming that the Tribunal would give all statements and reports the weight deserved, being attentive to identify any portions which attempted to introduce new evidence or argument on which responsive comment has not been possible. Each side was given a right to cross-examine experts on 14 February 2011.
41.
The Tribunal later ruled that Messrs. Reos, García and Guidi would appear only if Claimants elected to cross-examine them. In the event, Claimants declined the opportunity to cross examine these individuals.
42.
On 14 February 2011, a hearing on quantum was held at the seat of the Centre in Washington D.C.
43.
Present on behalf of Claimants were (i) Mr. Jean-Paul Palma from EDFI; (ii) Mr. Paolo Di Rosa, Ms. Mara Senn, Ms. Mallory Silberman, Mr. Kelby Ballena and Ms. Rosario Cornejo from ARNOLD & PORTER;5 and (iii) Messrs. A. Manuel Garcia and Pablo Valverde, consultants for Claimants‘ counsel.
44.
On behalf of Respondent attended (i) Dr. Gabriel Bottini, Dr. Ignacio Pérez Cortés, Ms. Verónica Lavista, Ms. Mariana Lozza, Mr. Patricio Arnedo Barreiro and Mr. Nicolás Grosse from the PROCURACIÓN DEL TESORO DE LA NACIÓN; (ii) Dr. Ignacio Torterola from the Argentine Embassy in Washington, D.C.; and (iii) Mr. Hugo Reos, a Representative of the Province of Mendoza.
45.
On 11 March 2011, Claimants and Respondent filed post-hearing briefs on quantum.
46.
Pursuant to certain objections raised during the February hearings, on 25 February 2011 the Parties each submitted a Motion to Strike. Claimants submitted a Motion to Strike in connection with the testimonies of Respondent‘s quantum expert as well as of certain references made by Respondent during closing arguments. Respondent‘s Motion to Strike concerned Claimants‘ Exhibits C262 and C263, which Respondent notes were filed with Claimants‘ pleadings on damages submitted prior to the hearings on quantum. Respondent also challenged the evidentiary weight of these exhibits. On 11 March 2011, the Parties submitted their responses with respect to the other side‘s Motion to Strike.
47.
Having fully considered the motions to strike made by Claimants and by Respondent on 25 February, as well as the responses of each side filed on 11 March, the Tribunal declined to grant either application, concluding that it was able to distinguish between what is, and what is not, relevant, material and admissible.
48.
The proceeding was declared closed on 13 March 2012.

E. COST SUBMISSIONS

49.
On 16 February 2012, in accordance with the Tribunal‘s request of 30 January 2012, and the extension of time it granted on 8 February 2012, each Party submitted its Statement of Costs ("Planilla de Costos").

II. FACTUAL BACKGROUND

A. THE CONCESSION AND ITS LEGAL FRAMEWORK

1. Overview

50.
The dispute arises out of a Concession Agreement between the Government of Mendoza and EDEMSA, signed on 15 July 1998 ("Concession Agreement") relating to the transmission and distribution of electricity. On 28 May 1997, the Government of Mendoza had reformed the regulatory framework governing distribution of electricity within the Province of Mendoza through the enactment of Provincial Law No. 6,497 ("Provincial Electricity Law")6 and Provincial Law No. 6,498 ("Transformation Law"),7 collectively referred to herein as the Regulatory Framework.
51.
The Regulatory Framework adopts at the provincial level Argentina‘s then-standing national policy on electricity transmission and distribution, which was passed at the federal level on 19 December 1991 as Federal Law No. 24,065. The purpose of the Regulatory Framework is to declare electricity transmission and distribution a public service and to implement a regulatory framework that ensures stability in the electricity sector. See Provincial Electricity Law, Articles 3 and 4. Among the more specific provisions, of particular importance are those contained in Chapter XI: Tariffs"Article 43 thru 52"of the Provincial Electricity Law.
52.
Article 43 of the Provincial Electricity Law endorses a policy of fair and reasonable rates to consumers for services supplied by electricity transmission companies and distributors. On the other hand, transmission companies and distributors are allowed to capitalize on an opportunity to derive sufficient income to cover relevant costs and to obtain a reasonable rate of return. In this regard, Article 43 in pertinent part provides:

Los servicios suministrados por los transportistas y distribuidores serán ofrecidos a tarifas justas y razonables, las que se ajustarán a los siguientes principios: (a) proveer a los transportistas y distribuidores que administren los servicios de acuerdo a pautas y parámetros de gestión internacionalmente aceptados, la posibilidad de obtener ingresos suficientes para satisfacer los costos operativos, de mantenimiento y de expansión de los servicios, los impuestos y una tasa de rentabilidad razonable determinada conforme lo dispuesto en el art. 46 de esta ley; [y]... (c) en el caso de tarifas de distribuidores, el precio de venta de la energía eléctrica deberá incluir los costos propios de distribución reconocidos al concesionario y un término representativo de los costos de adquisición de la energía eléctrica en el mercado eléctrico mayorista, de manera que las variaciones de este último se reflejen en las tarifas a los respectivos usuarios; (d) Asegurar el mínimo costo razonable para los usuarios, compatible con la seguridad del abastecimiento, la calidad del servicio y el uso racional de la energía[…]

In English, the provision reads,

The rates charged by electricity transmission companies and distributors shall be fair and reasonable and shall be subject to the following principles: (a) Rates shall afford transmission companies and distributors operating the services in accordance with internationally-accepted management guidelines and parameters, the opportunity to derive sufficient income to cover any operating, maintenance and expansion costs and taxes applicable to the services, and to obtain a reasonable rate of return defined pursuant to the provisions of Article 46 of this law; [and]... (c) For distribution rates, the electricity sale price shall include the specific distribution costs inherent in the distribution business recognized to the concessionaire, and a term representative of the cost of electricity purchased in the wholesale electricity market, in a manner such that any variations in this market may be reflected in the rates applied to the respective users; (d) Ensure the minimum reasonable cost to users, compatible with the security of supply, service quality and rational use of energy[…]

53.
Specific to electricity distributors, subsection (c) supra envisages what is known to be the "pass through" mechanism. As drafted, the end result is a tariff rate that reflects relevant distribution costs as well as variations in the costs of purchasing and distributing electricity, which "pass through" to consumers.
54.
Article 44 of the Provincial Electricity Law restricts the recoupment of costs attributable to services provided to one class of consumers with tariffs collected from another class or classes of consumers. Pursuant to Article 45 of the Provincial Electricity Law, tariff rates are capped at levels allowing for a rate of return that is compatible with the risk level characterizing the electricity transmission and distribution businesses as well as similar to other industries of comparable risk.
55.
In line with its underlying objective of stability, Article 46 of the Provincial Electricity Law contemplates for an initial tariff schedule not exceeding a fixed-term of five years as well as designed and calculated pursuant to principles set forth in Articles 43 thru 45 introduced supra.
56.
Pursuant to Article 47 of the Provincial Electricity Law, prior to the lapse of the initial tariff schedule, a successive tariff schedule also not exceeding a fixed-term of five years must be established ("Ordinary Review"), which mandates compliance with criteria similar to those employed in the design of the initial schedule while taking into consideration changes in the value of goods and services directly associated with the distribution of electricity.
57.
Article 48 of the Provincial Electricity Law requires strict adherence to approved tariff schedules. Pursuant to the same provision, however, schedules are subject to interim modification provided an application to that effect is based on objective and justified circumstances ("Extraordinary Review").
58.
Articles 74 and 75 of the Provincial Electricity Law create the Provincial Tariff Compensation Fund ("PTC Fund") in order to offset the differences in ordinary distribution costs recognized among the different concessionaires and to allow consumers with similar consumption characteristics to pay homogeneous tariffs for the electricity supplied.
59.
To oversee the implementation and execution of the regulatory framework, Article 14 of the Provincial Electricity Law created an independent regulatory agency known as Ente Provincial Regulador de la Electricidad ("EPRE"). EPRE is charged with duties to inter alia regulate the quality of electrical service, conduct tariff revisions, and apply penalties for any failures by concessionaires to meet standards set forth in the law, regulations and relevant concession agreements. See Provincial Electricity Law, Articles 53 thru 73.
60.
On the other hand, the specific purpose of the Transformation Law is to reorganize and privatize the formerly state-owned electricity distributor, Energía Mendoza Sociedad de Estado ("EMSE"). See Transformation Law, Articles 2 and 4. Article 2 of the Transformation Law separates EMSE‘s activities into those related to the generation of electricity and those to electricity distribution. Article 4 commissions the incorporation of three companies to become successors in interests of EMSE‘s divided operations.
61.
Accordingly, Empresa Distribuidora de Energía de Mendoza S.A. ("EDEMSA"), along with Empresa Distribuidora de Electricidad de Este S.A. ("EDESTESA"), were created to succeed EMSE as the Province of Mendoza‘s electricity distributors. The third company, Generación Eléctrica de Mendoza ("GEMSA"), assumed control over EMSE‘s electricity generating operations.
62.
As concerns EDEMSA, Article 4 of the Transformation Law specifies that the transfer of EMSE‘s electricity distribution concession is effectuated upon the sale of EDEMSA‘s Class "A" shares. Article 6 of the Transformation Law provides that:

La valuación de las unidades empresarias, será realizada en base al cálculo del valor actual del flujo neto de fondos descontado, generado por la actividad o activos que se privaticen, en concordancia con el art. 96 de la ley 24065, art. 19 de la ley nacional 23696 y de la ley provincial 6072. No serán admisibles ofertas económicas inferiores al setenta por ciento (70%) de la valuación oficial.

In English the relevant portion reads:

economic offers lower than seventy percent (70%) of the official valuation shall not be admissible.

2. Promotional and Bidding Schemes

63.
Starting from the second half of 1997, the Province of Mendoza sought the sale of 51% of EDEMSA Class "A" shares, and to further this end, retained Chase Manhattan Bank and Salomon Smith Barney as technical, financial and international marketing advisors to inter alia conduct an initial valuation of the offered EDEMSA shares and undertake in road shows to promote the sale thereof.
64.
The promotional scheme started with the Global Power Conference held in New York during the month of September 1997, and also included an exclusive meeting in Paris with executives of EDF, parent company to Claimant EDFI.
65.
In February 1998, Chase Manhattan Bank and Salomon Smith Barney distributed an Information Memorandum ("Info Memo") to potential investors, including Claimants, with the aim of aiding them with the decision of whether or not to participate in the purchase of EDEMSA shares. The Info Memo discusses inter alia the regulatory framework governing the concession, including its underlying policies on rates and returns, cost allocation, and revision of tariffs. With respect to costs, the Info Memo indicates tariff rates are to be subject to periodic tariff adjustments to account for the inflation of electricity distribution costs as assessed pursuant to an index combining variations in the U.S. producer and consumer price indices published by the U.S. Bureau of Labor Statistics.
66.
Furthermore, the Info Memo notes that costs reflected in the tariff schedule are to be first calculated in U.S. dollar terms and then converted to Argentine pesos for purposes of billing consumers.
67.
The official bidding process was launched on 23 February 1998 with the publication of the bidding terms ("Bidding Terms"). Among them was the prerequisite obliging bidders to accept and initial a copy of the concession agreement that was to be entered between the Government of Mendoza and EDEMSA. Paragraph 2.1.6 of the Bidding Terms provides that:

La aplicabilidad excluyente del derecho argentino y de la sumisión a la jurisdicción de los tribunales competentes en lo contencioso administrativo de la Provincia de Mendoza, renunciando expresamente a la aplicación de cualquier fuero extranjero regulado por nomas o tratados de cualquier tipo.

In English, the provision reads:

[The acquisition of the Bidding Terms and the presentation of offers imply:] the exclusive application of Argentine law and the submission to the jurisdiction of competent courts for administrative contentions of the Province of Mendoza, expressly renouncing the application of any foreign jurisdiction regulated by norms or treaties of any kind.

68.
A consortium company, SODEMSA, was formed between local co-investors and the French companies, EDFI, SAURI, and Crédit Lyonnais (former parent to Claimant León) to consolidate their respective interests in bidding for the purchase of 51% of EDEMSA‘s Class "A" shares.
69.
On 10 April 1998, Claimants EDFI and SAURI respectively acquired 45% and 15% interests in SODEMSA. On 20 April 1998, Crédit Lyonnais acquired a 70% interest in an Argentine company, MEDINVERT, which in turn purchased 40% of SODEMSA shares.
70.
The economic offers of the qualified bidders were opened in a formal ceremony held on 23 June 1998, at which time SODEMSA‘s bid of US$ 237.8 million was declared the winner. The second highest bid was for US$ 207.71 million, the third for US$ 200.63 million and the fourth was a bid for US$ 193.13.
71.
The Government of Mendoza and EDEMSA signed a formal agreement on 15 July 1998. On 27 July 1998, the Mendoza Congress subsequently approved the transaction and Claimants‘ consortium was officially awarded ownership over 51% of EDEMSA‘s Class "A" shares. SODEMSA assumed control of EDEMSA and commenced operations on 1 August 1998.
72.
Subsequently Crédit Lyonnais incorporated Claimant León under the laws of Luxembourg as a wholly-owned subsidiary to hold the former‘s interest in MENDINVERT, and accordingly transferred to León the relevant shares.

3. Contractual Framework

73.
The Concession Agreement has a prescribed term of thirty years, divided into three periods of ten years each. See Concession Agreement, Articles 3 and 4.
74.
The underlying policies of the regulatory framework formed under the Provincial Electricity and Transformation Laws, in particular those found in Chapter XI of the former, are expressly memorialized, as well as incorporated by reference, in the various provisions of the Concession Agreement. See e.g., Concession Agreement, Preamble ("Concession Agreement between the Province of Mendoza... and [EDEMSA]... with attention to the provisions of [Provincial] Laws Nos. 6,497, 6,498;... and all the legislation applicable in the Province of Mendoza...").
75.
In conformity with Article 3 of the Provincial Electricity Law, the objective of the Concession Agreement is to grant EDEMSA a concession for the exclusive provision of "the Public Service." See Concession Agreement, Article 1. The Concession Agreement in turn defines "Public Service" to be "the provision of electricity distribution services to Users who are connected to [EDEMSA‘s] electricity distribution grid, paying a tariff for the services received." See Concession Agreement at 2.
76.
Article 25 of the Concession Agreement, running parallel with Article 46 of the Provincial Electricity Law, obligates EDEMSA to apply an initial fixed-term tariff schedule during the first five years of the Concession Agreement‘s entry into force ("Initial Tariff Schedule"). The Initial Tariff Schedule is annexed to the Concession Agreement as Sub-Annex 3. See Concession Agreement, Article 27.
77.
Article 28 of the Concession Agreement memorializes the Ordinary Tariff Review contemplated for in Article 47 of the Provincial Electricity Law. In pertinent part, Concession Agreement Article 28 provides:

Previo al vencimiento el período inicial del Articulo 25, el EPRE elevará al Poder Ejecutivo la propuesta de las tarifas por períodos de CINCO (5) AÑOS. En los nuevos cuadros tarifarios se tendrá en cuenta lo dispuesto por los artículos 43 a 45 de la Ley N° 6,497 y su Decreto Reglamentario, y se establecerán los descuentos anuales previstos en el artículo 46 de la Ley N° 6,498. A ese fin, con UN (1) AÑO de antelación a la finalización de cada período de CINCO (5) AÑOS, la CONCESIONARIA presentará al EPRE la propuesta de un nuevo Cuadro Tarifario.

In English the provision reads:

Prior to the end of the initial period provided for in Article 25, EPRE shall submit to the Executive Branch the proposed rates for FIVE (5) YEAR periods. The provisions of Law 6,497, Articles 43-45, and its Regulations shall be taken into account in preparing the new rate structures and the annual discounts provided for Law 6,498, Article 46 shall be established. To that end, ONE (1) year before the end of each period of FIVE (5) YEARS the CONCESSIONAIRE shall present to EPRE the proposal for a new Rate Structure.

78.
The Extraordinary Tariff Review contemplated for in Article 48 of the Provincial Electricity Law is also memorialized in the Concession Agreement, which in Article 29 provides:

For the purpose of rate revision, EPRE:

a) May contract the services of a consulting group with recognized experience in the electrical sector, which must prepare an alternative rates proposal following guidelines identical to those defined for the CONCESSIONAIRE.

b) Shall analyze both proposals and establish the Rate Structure that shall be ineffect during the following FIVE (5) YEAR period.

The CONCESSIONAIRE must strictly apply the rates approved. Nevertheless, it may request from EPRE the changes it considers necessary, for which purpose the procedure established in Law 6,497, Articles 48 and following, and its regulations shall apply.

In Spanish the Provision reads:

EI EPRE, a los efectos de proceder a la revisión tarifaria:

a) podrá contratar los servicios de un grupo consultor de reconocida experiencia en el Sector Eléctrico, que deberá efectuar una propuesta tarifaria alternativa siguiendo idénticos lineamientos que los definidos para Ia CONCESIONARIA.

b) analizará ambas propuestas y establecerá el Cuadro Tarifario que estará vigente en el siguiente período de CINCO (5) AÑOS.

La CONCESIONARIA deberá aplicar estrictamente las tarifas aprobadas. Sin embargo, podrá solicitar al EPRE las modificaciones que considere necesarias, a cuyo fin se aplicará el procedimiento previsto por los artículos 48 y ss. de la Ley No 6,497 y su reglamentación.

79.
As introduced supra, Article 48 of the Provincial Electricity Law in pertinent part provides that "[t]ransmission companies and distributors... may, however, solicit to the EPRE modifications considered to be necessary, if their application is based on objective and justified circumstances."
80.
The Concession Agreement also memorializes as contractual terms those matters highlighted in the Info Memo, including inter alia the accounting of costs reflected in the tariff schedule in U.S. dollar terms as well as the periodic adjustment of rates in consideration of inflation in electricity distribution costs. See Concession Agreement, Sub-Annex 2 ("Calculation of Tariff Schedule Parameters").
81.
The Currency Clause in Sub-Annex 2 of the Concession Agreement is of particular importance to the claims raised in the present dispute, and Section I of Sub-Annex 2 in pertinent part provides as follows:

Todos los costos mencionados se calcularán y recalcularán en dólares estadounidenses. El Cuadro Tarifario recalculado o resultante, se expresará en el momento de su aplicación para la facturación a los usuarios en pesos ($), teniendo en cuenta para ello la relación para la convertibilidad al peso, establecida en el Articulo 3° del Decreto Nacional N° 2128/91 y en las condiciones establecidas en la ley 23,298.

In English translation, the provision reads:

All the aforementioned costs shall be calculated and recalculated in U.S. dollars. The recalculated or resulting Rate Structure shall be expressed in Argentine pesos ($) at the time it is applied to the user invoices, at the peso conversion rate established in National Decree 2128/91, Article 3, and under the conditions established in [Federal] Law [No.] 23,298 [text corrected by hand to read: "23,928"].

82.
First, the Currency Clause‘s cross-references to Federal Law No. 23,928 and its implementing National Decree No. 2,128 (collectively "Convertibility Law") point to a federal legislation and its implementing executive order, respectively passed and issued in March and October of 1991, seven years prior to the signing of the Concession Agreement, as part of a national policy on economic reform instituted in the late-1980‘s and early-1990‘s by Argentina‘s former president, Carlos Menem. Upon its implementation, the Convertibility Law pegged the Argentine peso to the U.S. dollar at a foreign exchange rate of one to one, which as further discussed infra lasted until 6 January 2002.
83.
In other words, the operation of the Currency Clause may be summarized as follows. Pursuant to the "pass through" mechanism elaborated in Article 43(c) of the Provincial Electricity Law introduced supra, tariff rates invoiced to consumers must reflect for EDEMSA‘s costs of purchasing and distributing electricity, specifically those mentioned in the first paragraph of Section I of Sub-Annex 2, namely, costs representing the purchase of electricity from the Electricity Wholesale Market ("MEM") as well as the transportation, distribution and commercialization of electricity.
84.
These costs are then coupled with the concessionaire‘s return on capital to make up what is referred to as the distribution-added value ("DAV"). The DAV passes the costs of purchasing and distributing electricity through to the final consumer and constitutes the only remuneration the distributor obtains for services provided.
85.
The Currency Clause prescribes the calculation of these costs in terms of U.S. dollar currency for purposes of assessing the ultimate tariff rate to be invoiced to consumers. Subsequently, user invoices would be expressed in Argentine pesos in accordance with the monetary policy and exchange rate contemplated for in the Convertibility Law, which until 6 January 2002 pegged parity between the U.S. dollar and the Argentine peso at a ratio of one to one.
86.
Second, the Currency Clause‘s reference to "recalculation" of costs concerns the periodic adjustment of tariff rates to account for the inflation of electricity distribution costs, which was highlighted in the Info Memo. In this connection, Section IV of Sub-Annex 2 ("Cost Adjustment Clause") in pertinent part provides:

Los Costos Propios de Distribución y los Gastos de Comercialización se recalcularán anualmente en coincidencia con la actualización de los Precios Mayoristas de Energía y Potencia para el período estacional que da inicio en el mes de Noviembre de cada año, y tendrán vigencia para los doce (12) meses siguientes al recálculo. Para el recálculo anual se utilizará la siguiente expresión:...

In English the provision reads:

The Actual Distribution Costs and the Marketing Costs shall be recalculated each year to coincide with the updating of the Wholesale Energy and Power Prices for the seasonal period beginning in November each year and shall be in effect for the twelve (12) months following the recalculation. The following expression shall be used for the annual recalculation:....

87.
Accordingly, the Cost-Adjustment Clause directs adjusting tariff rates every twelve months in the month of November. At that time, pursuant to the Currency Clause, relevant costs would undergo a recalculation in U.S. dollars. The purpose of the recalculation is to account for the inflation of electricity distribution costs, which must be assessed in accordance with an index combining variations in the U.S. producer and consumer price indices published by the U.S. Bureau of Labor Statistics. The Producer Price Index ("U.S. PPI") is an indicator of the wholesale price of industrial commodities in the United States, while the Consumer Price Index ("U.S. CPI") is an indicator of U.S. retail prices.
89.
Claimants‘ consortium company, SODEMSA, which owned 51% of EDEMSA Class "A" Shares, thus is what is referred to when the Concession Agreement speaks of "the Investment Company owning the Majority Stake." For example, pursuant to Article 12 of the Concession Agreement "the Investment Company owning the Majority Stake" may not "modify its holdings nor sell its shares during the first five (5) years of Entry into Force, without previous authorization of the Executive Power. *** For their part, the shareholders of the referred to Investment Company shall not be able to modify their holdings or sell their shares in said Investment Company during the term of five (5) years since Entry into Force without prior approval of the [Province of Mendoza]."8
90.
Article 13 of the Concession Agreement makes it EDEMSA‘s exclusive responsibility to "realize the necessary investments to assure the provision of the Public Service in conformity with the level of quality required...."9 See also, Concession Agreement, Article 22 (listing as sub-articles thereof the various obligations of the concessionaire). On the other hand, Article 23 of the Concession Agreement obliges the Province to "guarantee... the exclusivity of the Public Service, for the duration and subject to the conditions determined in the present Contract." In accordance with these provisions, which collectively form the structure of what is referred to as the "price cap system," EDEMSA can only enhance profitability by lowering costs and increasing efficiency rather than through an escalation of tariff rates.
91.
Article 32 of the Concession Agreement authorizes EPRE to sanction EDEMSA for nonperformance of the latter‘s contractual obligations. See also, Concession Agreement, Sub-Annex 5, which contains the prescribed sanctions EPRE is authorized to apply.

B. PRE-EMERGENCY MEASURES AFFECTING THE CONCESSION

92.
The Tribunal notes a certain fluidity in the claims relating to regulatory measures adopted prior to the national and provincial emergency laws discussed below ("Pre-Emergency Measures affecting the Concession"). Claimants initially listed seven (7) such preemergency measures which allegedly breached the Concession Agreement. See Memorial of 2 May 2005, page 69-88. However the damages calculation in the same Memorial (pages 223-224) includes only five enumerated measures (having split the initial category 4 into categories 3 and 5), plus another item at paragraph 480 concerning "additional obligations" seeming to omit the quasi-currency payment matter and the more stringent conditions of service. See Claimants‘ Memorial, at paragraphs 478-79; see also LECG Report of April 2005, at paragraphs 168-84.
93.
Moreover, Claimants‘ Post-hearing Brief on Quantum, as well as their expert reports, seems to omit discussion not only of quasi-currency payments and the more stringent conditions of service, but also Claimants‘ prior calculation of damages for what was referred to as "unilateral expansion of the scope of concession by including the Polvaredas area" See Claimants‘ Memorial, at paragraph 480.
94.
Respondent‘s enumeration of the various items takes a different approach, including ten (10) items in their Counter-memorial and nine (9) in their Rejoinder.
95.
Claimants‘ initial seven (7) categories are as follows:

- First Modification of Tariff Schedule: the "Use of Network" Fees

- Unilateral Expansion of the Scope of Concession

- Second Modification of Tariff Schedule: The Optional T-2 Tariff Category

- Refusal to Pay Amounts Owed to EDEMSA and Denial of Access to Court

- Modification of the Subsidies Regime

- Imposition of More Stringent Conditions Regarding Quality of Service

- Imposition of the Obligation to Accept Quasi-currency as payment from users.

96.
Respondent‘s ten (10) item categorization are provided as follows:

- Modification of "Use of Network" Fees

- Second Modification to Tariff Schedule: The Optional T-2 Tariff Category

- Incorporation of the Town of Polvaredas Into the Concession Area

- Incorporation of the "scattered electricity market" Users

- Failure to Pay Amounts Owed in Regards to Nihuil IV (First Nihuil Claim)

- Failure to Pay Amounts Owed in Regards to Nihuil IV (Second Nihuil Claim)

- Failure to Pay Subsidies and Provision of Public Lighting Services

- Modification of the "Agricultural Irrigation" Subsidies Regime

- Imposition of More Stringent Conditions Regarding Quality of Service

- Imposition of the Obligation to Accept Quasi-Currency from Users.

97.
The Tribunal finds that the substantial overlap among the various categories of PreEmergency Measures affecting the Concession commends analysis according to the following six (6) rubrics.

1. Tariff Schedule under the Concession Agreement

a) Payment Structure Applicable to Large Users

98.
Anexo II, Subanexo 1 of the Concession Agreement set forth a tariff schedule ("Tariff Schedule") which inter alia established different tariff categories depending on the type of user. Anexo II, Subanexo 1, Chapter 2, subsection 3 of the Tariff Schedule in the Concession Agreement provides that one of the components of the tariffs applicable to large users is a fee for "Use of the Network" ("Network-Use Fee"). Under Anexo II, Subanexo 1, "Tarifa Nro. 2 (Grandes Demandas)" of Chapter 2, Subsection 1, users were to fall under the Tariff No. 2 ("T-2") category when their maximum power demand exceeded 10kW.
99.
The Network-Use Fee is calculated based on the power capacity that is installed and made available to each particular user. Every twelve months, each user is to notify EDEMSA of the power capacity that it will require in the next twelve-month period. The power capacity requested by, and made available to, each user determines the amount of the fee each user will pay for use of the network during the relevant twelve-month period.
100.
Issued on 28 August 1998, Resolution No. 8/98 established a different fee schedule based on the last non-null power recorded by each user immediately prior to the beginning of the concession. Resolution 8/98 retroactively applied to the date of 1 August 1998, which was the first day of the Concession Agreement.
101.
The Parties disagree on whether the tariff schedule set forth by Resolution No. 8/98 was intended to apply to all large users, including those pre-existing the Concession Agreement, or solely to future large users.
102.
On 16 September 1998, EDEMSA filed an administrative claim before EPRE challenging Resolution 8/98. On 12 May 1999, EPRE issued Resolution EPRE No. 73/99, in which it rejected EDEMSA‘s claim.
103.
Resolution No. 73/99 allowed large users to contract with EDEMSA for the level of power required on a quarterly or bi-annual basis.
104.
EDEMSA filed an administrative appeal before the provincial executive power on 28 May 2000, challenging both Resolution 8/98 and Resolution 73/99.
105.
On 22 November 2000, the Government of Mendoza issued Decree No. 2468, rejecting EDEMSA‘s claims and confirming the modifications to the Concession Agreement.

b) Optional Tariff T-2 Category

106.
The Tariff Schedule under the Concession Agreement provided for a "transitory tariff", applicable to all users who at the beginning of EDEMSA‘s concession either (i) did not have power measuring equipment appropriate for their classification level within the Tariff Schedule established by the Concession Agreement, or (ii) had yet to be classified under one of the categories provided in the Tariff Schedule. See " Tariff Regime - Tariff Schedule"; Concession Agreement, Annex II, Sub-Annex 1, Chapter 5 ["Miscellaneous Orders"], Paragraph 2. In such cases, the transitory tariff was to apply until the user was classified under a tariff category.
107.
The Concession Agreement required EDEMSA to install the requisite measuring equipment and to classify each user based on its respective power consumption. The Concession Agreement required EDEMSA to complete the meter installation and user classification by specific deadlines, which, depending on the user‘s level of service demand, was either 6 or 12 months.
108.
During August and September 1999, EPRE issued Resolution No. 125/99, which was later supplemented by Resolution No. 131/99. The evidence shows that Resolution No. 125/99 permitted users whose successive readings falls below 10 kW to continue with their original tariff category, known as the Tariff No. 1 ("T-1") category, applicable to small demands. Resolution No. 131/99 suspended payment obligations of those users which had already been reclassified or were about to be reclassified as T-2 large users, and mandated refund of any and all monies that may have been billed in excess due to their reclassification. Resolution No. 131/99 required EDEMSA to resend invoices to every user which had been reclassified as "T-2 Large Demands." The revised invoices were to be based on the tariff class which was in force prior to their reclassification. Such recalculation was required from the time the reclassification was implemented.
109.
On 9 December 1999, the transitory tariff was extended for a period of one year until 31 July 2000.
110.
On 11 August 2000, following expiration of the one-year extension, the Governor of Mendoza issued Executive Order No. 1632/00, which incorporated into Chapter 2 of the Concession Agreement a new tariff category as "Subparagraph 7: Large Demands (Optional)." This order was to be in force from 1 August 2000 to 31 July 2003.
111.
Decree No. 1632/00 provided all users who had benefited from the transitory tariff the option to remain within such class, identified as the "Optional T-2" category, or to be reclassified into a new category based on their actual power consumption. The Parties are in dispute as to whether the "Optional T-2" Tariff was to include a Network-Use Fee.
112.
On 13 September 2000, EDEMSA filed an administrative action before the Supreme Court of Mendoza challenging the constitutionality of Decree No. 1632/00.

2. Polvaredas Area and the Scattered Electricity Market

113.
Under Resolution EPRE No.183/99, EPRE expressly incorporated a local town, known as "Polvaredas", into EDEMSA‘s area of concession, and obligated EDEMSA to serve such town.
114.
Polvaredas is geographically located within the area covered by EDEMSA‘s Concession Agreement, but the Parties dispute whether such town had been expressly excluded from the area of concession specifically defined in the Concession Agreement. Polvaredas was not connected to the distribution network transferred to EDEMSA, and, therefore, required its own generation equipment, which had not been transferred to EDEMSA with the concession.
115.
On 23 May 2002, EDEMSA challenged Resolution EPRE No. 183/99 before the Supreme Court of Mendoza. The Parties disagree as to whether the Supreme Court of Mendoza had rendered a decision with respect to EDEMSA‘s challenge of 23 May 2002.
116.
On 3 December 1999, the Government of Mendoza issued Provincial Decree No. 2379/99, expressly incorporating into EDEMSA‘s area of concession another category for users that fall within the "scattered electricity market" ("Scattered Market"). This category comprises of users that are located in distant regions, and that are not linked to the interconnected distribution network.
117.
On 8 March 2000 EDEMSA challenged the constitutionality of Provincial Decree No. 2379/99 before the Supreme Court of Mendoza. The Parties disagree whether a decision has been rendered by the Supreme Court of Mendoza with respect to EDEMSA‘s challenge of 8 March 2000.

3. Alleged Failure to Pay Amount Owed

a) Nihuil IV Claims

118.
Article 37 of the Transformation Law mandated the assignment of EMSE‘s rights and obligations arising out of a contract entered into with a power generation company, Hidronihuil S.A. The contract was for the construction, operation and maintenance of a hydroelectric power plant known as NIHUIL IV ("Nihuil IV Contract").
119.
The Nihuil IV Contract provided, inter alia, for a commitment by EMSE to purchase all of the Nihuil IV power plant‘s output at a price higher than that available in the Electricity Wholesale Market. Article 37 of the Transformation Law established that "[t]he difference between the price that EDEMSA must pay pursuant to this contract and the purchase value of energy in the electricity wholesale market, shall be compensated to EDEMSA by the Province with funds allocated pursuant to Article 47."
120.
In conformity with Article 37 of the Transformation law, Article 22.36 of the Concession Agreement memorialized the same compensation scheme. In return for servicing a loan obtained by EMSE for purposes related to the construction of the NIHUIL IV, EDEMSA would receive monthly payments of the difference between the NIHUIL IV price and the going market price.
121.
The evidence shows that, in February 2000, the Government of Mendoza stopped making payments to EDEMSA for the compensation provided for under Article 37 of the Transformation Law and Article 22.36 of the Concession Agreement.
122.
On 20 November 2000, EDEMSA filed a claim before the Supreme Court of Mendoza seeking payment of amounts accrued during the period of February to July 2000. On 31 May 2002, Supreme Court of Mendoza declined to hear EDEMSA‘s claim, instructing EDEMSA to exhaust all recourses available at the administrative level before resorting to the judiciary.
123.
EDEMSA appealed the decision of 31 May 2002 before the Federal Supreme Court of Argentina. In August 2003, the Federal Supreme Court declined to hear EDEMSA‘s case, finding that it lacked jurisdiction to review an interim procedural decision. On 14 March 2002, EDEMSA filed a similar claim of reimbursement before the Supreme Court of Mendoza, this time seeking payment of amounts accrued during the period August 2000 to June 2001.
124.
Following the Mendoza Supreme Court‘s dismissal of its first claim with respect to NIHUIL IV, EDEMSA withdrew its second claim, and filed a demand for payment with the provincial government authorities. Thereafter, EDEMSA filed an administrative request for "pronto despacho", which is a request under administrative law for an expedited decision. EDEMSA received no response from the government authorities.
125.
Subsequently, EDEMSA filed an amended complaint with the Mendoza Supreme Court. In August 2003, the Supreme Court refused to hear EDEMSA‘s claim for lack of jurisdiction to review an interim procedural decision.
126.
Under a contractual renegotiation agreement executed by EDEMSA and the Government of Mendoza, the parties agreed on a procedure to honor the outstanding payments due to the Concessionaire as at 31 February 2005, including the NIHUIL IV non-payments.

b) Subsidies and Public Lighting Services

127.
The Tariff Schedule in the Concession Agreement provided for the application of subsidized tariffs for certain users, such as the elderly and those engaged in agricultural irrigation, as well as certain sectors, such as rural areas. The Tariff Schedule establishes that the difference arising out of the application of such tariff in lieu of that set forth in the Concession Agreement shall be covered by the PTC Fund.
128.
To collect from the PTC Fund, EDEMSA was required to submit a monthly statement before EPRE, itemizing the amounts due by the Government. EPRE was required to review the calculations submitted by EDEMSA and upon approval, to pay the appropriate amounts due within ten business days from the date of EPRE‘s notice of approval.
129.
Since August 1999, the provincial government has failed to make payments owed, including compensation for the above-mentioned subsidy as well as for the provision of the public lighting services, despite EDEMSA continuing to submit monthly statements and obtain EPRE approvals.
130.
In August 2001, EDEMSA filed an administrative claim with the Ministry of the Environment and Public Works (the authority in charge of managing the Provincial Fund). Receiving no response, in September 2001, EDEMSA filed a similar request with the Governor‘s office. On 14 March 2002, EDEMSA filed a claim before the Supreme Court of Mendoza seeking payment of AR$ 5,498,653.19. On 31 October 2002, the Supreme Court of Mendoza refused to hear EDEMSA‘s claim.

4. Agricultural Irrigation Subsidies

131.
The Transformation Law set forth a mechanism for subsidizing the electricity consumption by certain agricultural users for irrigation purposes.
132.
Under this system, EDEMSA was to be compensated for the difference between the subsidized tariff, referred to as the "Reference Tariff", and a benchmark tariff, known as the "Tariff Payable to Distributor." Under Article 36 of the Transformation Law, all amounts due to EDEMSA were to be paid out from the Provincial Fund for the Compensation of Tariffs.
133.
This subsidy mechanism implemented by the Transformation Law was incorporated into EDEMSA‘s Concession Agreement. Accordingly, Chapter 2 of the Tariff Schedule in the Concession Agreement required EDEMSA to apply the "Reference Tariff" to agricultural producers. Chapter 2 set forth the government‘s obligation to compensate EDEMSA for the difference that may exist between the amounts billed to the beneficiaries of the subsidy and those that would result from the application of the "Tariff Payable to Distributor."

5. Imposition of Service Quality Conditions

134.
On 5 January 2001, the Government of Mendoza enacted Provincial Law No. 6,856. Sections 2 through 6 of Law No. 6,856 set forth procedures for the filing of claims against EDEMSA by users who allege damages due to failures in the electricity distribution system.
135.
Section 2 eliminated the requirement to file an administrative claim in the first instance, thereby enabling users to resort directly to local courts. Section 5 directed courts to increase by fifty percent any damages award against EDEMSA in the event that EDEMSA challenges the merits of the claim or the existence of the alleged failure in the system. Section 6 established that the failure to comply with a damages award is tantamount to a "severe breach."
136.
EDEMSA filed a claim challenging Law No. 6856 on the ground that many provisions thereof were contrary to the Provincial Constitution. The Provincial Supreme Court dismissed the action brought by EDEMSA on 10 August 2005.

6. Quasi-Currency

137.
Provincial Laws No. 6955 (4 December 2001) and No. 6982 (20 February 2002) required EDEMSA to accept payment from its clients with notes, in lieu of monetary currency, issued by the Mendoza government‘s treasury for users‘ electricity bills.
138.
These notes were known as "LECOPS" (Letras de Cancelación de Obligaciones Provinciales or "Notes for the Cancellation of Provincial Obligations" ) and "PETROMS."
139.
Under Section 2 of Provincial Law No. 6955, a penalty against EDEMSA would apply in the event it refused to accept payments in LECOPs.
140.
Section 6 of Law No. 6982 established that the notes would mature on 30 September 2003, on which 110.4904% of their nominal value would be paid.

C. EMERGENCY LAWS AND RENEGOTIATION PROCESS

1. National and Provincial Emergency Laws

141.
The confusion and disorder characterizing the economic turmoil experienced by Argentina during late-2001 and early-2002 ("Argentine Economic Turmoil") is well documented by tribunals which have addressed investment treaty-based claims arising from the measures undertaken by Argentina in response to then-existing circumstances.10
142.
In late 2001, Argentine banks experienced massive bank runs, protests and demonstrations were wide-spread, and upon the resignation of elected President Fernando de la Rúa in late December 2001, the national government subsequently witnessed the appointment and resignation of four presidents within the span of three weeks. The Argentine Congress ultimately appointed Eduardo Duhalde as interim president for a term to last until December 2003.
143.
On 19 December 2001, Federal Decree No. 1678/2001 was issued pursuant to Article 23 of the Argentine Constitution, which grants constitutional authority to the Executive and Legislative branches to declare a State of Siege (" Estado de Sitio ") in instances considered to threaten the exercise of the Argentine Constitution. Federal Decree No. 1678/2001 originally contemplated a State of Siege to last for thirty days but was terminated three days later on 21 December 2001 through the issuance of Federal Decree No. 1679/2001.
144.
President Duhalde‘s first measure to stabilize his nation‘s economy was the enactment of Federal Law No. 25,561 on 6 January 2002 ("National Emergency Law").11 Of particular importance is Articles 3 thru 5 and 8 thru 10 of the National Emergency Law.
145.
First, Articles 3 thru 5 of the National Emergency Law (the "2002 Monetary Measures") amended the Convertibility Law in ways that abrogated the fixed foreign exchange rate of one Argentine peso to one U.S. dollar that was adopted in the early 1990‘s, and in its stead, implemented a floating monetary regime whereby the value of the local currency would be determined by market forces. Once the fixed-parity regime was set aside, the Argentine peso devalued on average three-fold so that one Argentine peso could no longer be converted into one U.S. dollar but rather approximately three Argentine pesos would be needed to acquire the same U.S. dollar.
146.
Second, Articles 8 thru 10 of the National Emergency Law (hereinafter "Emergency Tariff Measures") inter alia abrogated tariff terms involving foreign currencies contained in public utilities contracts, including the Concession Agreement‘s Currency and Cost-Adjustment Clauses. In conformity with principles of federalism, the Government of Argentina invited its provinces to adopt the Emergency Tariff Measures.12 See National Emergency Law, Article 14.
147.
For its account, through the enactment of Provincial Law No. 6,976 on 15 January 2002 (hereinafter "Provincial Emergency Law"), the Government of Mendoza adopted the Emergency Tariff Measures, fully adhering to Articles 8 and 10 of the National Emergency Law and, as discussed infra, adopting a slightly revised version of Article 9. The texts of Articles 8 and 10 of the National Emergency Law are not separately spelled out in the Provincial Emergency Law but rather incorporated therein by reference. See Provincial Emergency Law, Article 1.
148.
Accordingly, Article 8 of the National Emergency Law provides as follows:

ARTICULO 8° " Dispónese que a partir de la sanción de la presente ley, en los contratos celebrados por la Administración Pública bajo normas de derecho público, comprendidos entre ellos los de obras y servicios públicos, quedan sin efecto las cláusulas de ajuste en dólar o en otras divisas extranjeras y las cláusulas indexatorias basadas en índices de precios de otros países y cualquier otro mecanismo indexatorio. Los precios y tarifas resultantes de dichas cláusulas, quedan establecidos en pesos a la relación de cambio UN PESO ($ 1) = UN DOLAR ESTADOUNIDENSE (U$S 1).

149.
The relevant English translation, taken from Mr. Eduardo Ratti‘s statement of 15 November 2008, would read: "All clauses adjusting prices in dollars or any other foreign currency and any price indexation clauses in any government contracts under public law, including public works and services, shall be null and void. Prices and rates arising from any such provisions are hereby established in pesos at a rate of ARS 1 = US$ 1."
150.
The Concession Agreement, being a public service contract, falls under the ambit of the Emergency Tariff Measures, which declares the Cost-Adjustment Clause no longer applicable since the provision is one regarding adjustment in U.S. dollars as well as adjustment based on foreign price indices. By precluding periodic tariff adjustments as provided for in the Cost-Adjustment Clause, the Emergency Tariff Measures in effect placed a freeze on tariff rates.
151.
Furthermore, despite the 2002 Monetary Measures, which de-pegged the Argentine peso so as to float at one-third of its value vis-à-vis the U.S. dollar prior to the abrogation of the Convertibility Law, the Emergency Tariff Measures imposed a fixed parity rate between the U.S. dollar and Argentine peso of one to one for purposes of assessing "[p]rices and rates arising from" the Cost-Adjustment Clause. See National Emergency Law, Article 8. This latter aspect of the Emergency Tariff Measures is commonly referred to (and therefore herein as well) as "pesification" and it effectively overrides the Currency Clause, the primary provision in the Concession Agreement addressing the calculation and recalculation of costs and tariffs as well as the terms of conversion thereof between the U.S. dollar and the local currency.
152.
The second component of the Emergency Tariff Measures is contained in Article 9 of the National Emergency Law, which authorizes the national executive power to renegotiate all contracts included under Article 8 pursuant to five prescribed criteria, including inter alia the profitability of the company.
153.
As mentioned supra, the Government of Mendoza adopted a slightly revised version of Article 9 as Provincial Emergency Law, Article 2, which adds a sixth criterion, taking into account when renegotiating Public Services Contracts the following factors: (1) the impact of rates on economic competitiveness and income distribution; (2) service quality and investment plans, where these are contemplated in the relevant contracts; (3) user interest and service accessibility; (4) the security of the systems covered; (5) corporate profitability; and (6) the tariff revision methodology established in the relevant Concession Agreements.
154.
The third and last prong of the Emergency Tariff Measures, Article 10 of the National Emergency Law, which as mentioned supra was fully adhered to by the Province, prohibits public utility concessionaires, including EDEMSA, from derogating contractual obligations during the Renegotiation Process. This provision of the Emergency Tariff Measures proclaims that under no circumstances are contracting companies or providers of public services authorized to suspend or alter the performance of their obligations.
155.
In Spanish, National Emergency law Article 10 provides:

Las disposiciones previstas en los artículos 8° y 9° de la presente ley, en ningún caso autorizarán a las empresas contratistas o prestadoras de servicios públicos, a suspender o alterar el cumplimiento de sus obligaciones.

In English, the provision reads:

Under no circumstances will the provisions of articles 8 and 9 herein authorize utility companies to suspend or change the performance of their obligations.

156.
For ease of reference, the Tribunal will on occasion make reference to "Emergency Measures" to include analogous legislative dispositions of both the federal and the provincial governments.

2. Renegotiation Process and Ordinary as well as Extraordinary Reviews

157.
In conformity with Article 2 of the Provincial Electricity Law, on 26 April 2002 the Government of Mendoza created the Renegotiation Commission of the Public Utilities Agreements ("Renegotiation Commission"), which, acting under the aegis of EPRE and the Ministry of the Environment and Public Works ("ME&PW"), was commissioned to handle the renegotiation of the EDEMSA Concession Agreement ("Renegotiation Process"). See Provincial Decree No. 487/2002 of 26 April 2002.
158.
In July 2002, EDEMSA defaulted on its financial debt.
159.
On 24 July 2002, Claimants EDFI and SAURI, along with Crédit Lyonnais, parent company to Claimant León, filed an initial notice of amicable consultations under the Article 8(1) of the Argentina-France BIT, which provides:

Tout différend relatif aux investissements, au sens du présent Accord, entre l‘une des Parties contractantes et un investisseur de l‘autre Partie contractante est, autant que possible, réglé à l‘amiable entre les deux Parties concernées.

In English, the provision reads:

Any dispute concerning investments in the terms of this Agreement between one Contracting Party and an investor of the other Contracting Party shall whenever possible be settled by amicable consultations between the two parties to the dispute.

160.
On 1 August 2002, EDEMSA filed an application for Extraordinary Review pursuant to Article 48 of the Provincial Electricity Law, which was followed by similar applications by other companies involved in the electricity sector. Through Resolution No. 400 of 20 September 2002, EPRE rejected all of these applications on grounds of failure to present a "specific petition in clear and accurate terms" in accordance with Section 129(c) of Law No. 3909 of the Mendoza Administrative Procedure.
161.
Pursuant to Article 5 of Provincial Decree No. 487/2002, which marked the beginning of the Renegotiation Process, the Renegotiation Commission was initially required by law to produce new concession terms within a time frame of 180 days that ran from July 2002 until December 2002. The renegotiation, however, was unsuccessful. Consequently, on 17 January 2003, the Government of Mendoza extended the deadline for an additional 180 days up to July 2003 through Provincial Decree No. 89/2003.
162.
Prior to the passage of Provincial Decree No. 89/2003, however, on 13 December 2002 EPRE held a public hearing wherein twenty-six entities, including EDEMSA, non-profit organizations, unions, service companies, and users participated ("2002 Public Hearing"). Thereafter, EPRE, on the advice of Consultancy Jorge Lapeña y Asociados S.A., prepared a report proposing an acknowledgement of US$ 39.6 million to EDEMSA ("JL&A Report").
163.
According to the JL&A Report, EPRE concluded that as of 13 December 2002 EDEMSA covered its operating costs with the average tariff. However, that tariff did not cover payment of principal or interest on most of its debt.
164.
Despite the extension, the renegotiation process proved unsuccessful once again, and thus prompted the Mendoza Executive‘s issuance of Provincial Decree No. 1539/2003 which made effective a second extension that was to expire on 10 December 2003.
165.
Upon failure to reach an agreement on renegotiation terms by December 2003, Provincial Law No. 7,187 was passed on 24 February 2004 to extend the deadline yet again to lapse at the end of 2004.
166.
Finally, upon the failure yet again to agree on renegotiation terms by the end of the third extension, the Government of Mendoza enacted Provincial Law No. 7,324 which extended the deadline to 30 June 2005. This was the fourth and last extension to the renegotiation deadline before Claimants notified EPRE in July 2004 of their intention to divest from EDEMSA.
167.
On 17 January 2003, approximately one year after the enactment of the Emergency Laws, the Government of Mendoza passed Provincial Law No. 7,091, pursuant to which government funds were allocated to the PTC Fund for distribution among the various electricity distributors operating within the Province of Mendoza. Article 59 of Provincial Law No. 7,091 expressly establishes that "Cooperatives" (smaller electricity distributors all of which were owned by local investors at the times relevant to the present dispute) are to be given preference over EDEMSA with respect to the allocation of payouts.
168.
On 13 March 2003, the governor of Mendoza issued Provincial Decree No. 323/2003, which sought to institute a 3.4% increase to the DAV reflected in EDEMSA‘s tariff schedule to apply until the completion of the Renegotiation Process. Without acknowledging any specific right of EDEMSA, EPRE explicitly approved the governor‘s proposal by issuing Resolution No. 467/2002. The increase in DAV, however, was ultimately rejected by the Mendoza Senate and thus, never entered into force.
169.
On 20 March 2003, EDEMSA and EPRE entered into a Memorandum of Agreement No. 1 ("Memorandum No. 1"), which formally postponed the requirement level as prescribed in the Concession Agreement‘s Sub-Phase 2 of Control Phase I, which EDEMSA took on to achieve by December 2001. Memorandum No. 1 also left it up to the concessionaire‘s discretion to notify the moment when its operational and management systems would be ready to begin supplying services in accordance with the stricter quality standards imposed in Control Phase II.

3. Commencement of ICSID Arbitration

170.
As detailed supra in the Procedural History part of this Award, on 16 June 2003 Claimants EDFI and SAURI filed a request for arbitration against Respondent. The Request of 16 June was subsequently amended on 4 August 2003 to join León as an additional claimant, and on 12 August 2003 the Acting Secretary-General registered the Amended Request as ICSID Case No. ARB/03/23 under the formal heading, EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic.

4. Claimants' Divestment and Increases in Tariff Rates

171.
On 12 March 2004, Claimants EDFI agreed to purchase from Crédit Lyonnais the interest in EDEMSA held by León, thereby transferring Crédit Lyonnais‘s indirect ownership in EDEMSA to EDFI. In the following month on 7 April 2004, EDFI purchased all of SAURI‘s interest in SODEMSA. These two transactions conferred upon EDFI complete ownership of SODEMSA, which held 51% of EDEMSA Class "A" shares, by adding a 55% interest in SODEMSA to EDFI‘s pre-existing 45% ownership.
172.
In July 2004, Claimant EDFI informed EPRE of an agreement reached between EDFI and a local Mendoza-based investment firm, IADESA, to sell EDFI‘s shares in SODEMSA to the latter. On 10 February 2005, the Argentine press reported on the Province of Mendoza‘s intention to institute a 12% increase in EDEMSA‘s tariffs.
173.
On 10 March 2005, EPRE submitted to the Renegotiation Commission its proposal to grant a tariff increase based on a study on the Concession Agreement conducted by EPRE‘s independent expert, Universidad Tecnológica Nacional - Regional Tucumán ("UTN Report").
174.
Later that month, on 30 March 2005, EDFI effectuated the sale of its SODEMSA shares to IADESA for US$ 2 million, including all direct and indirect interests in EDEMSA which EDFI had acquired from SAURI and Crédit Lyonnais. This marked the end of the Renegotiation Process.
175.
On the basis of the March 2005 sale, Claimants affirm they no longer have any direct or indirect ownership in EDEMSA or related companies but nevertheless have retained all rights to claims related to their prior ownership in EDEMSA, thus making them entitled to any damages this Tribunal concludes to have been suffered by EDEMSA during the time when Claimants‘ were owners thereof. Respondent does not controvert this proposition.
176.
On 7 April 2005, a week after Claimants‘ sale of their investment to IADESA, the Province of Mendoza executed a Letter of Understanding (the "Letter of Understanding") with the now locally-owned EDEMSA providing for a DAV increase of 38.05%, thus acknowledging the need to increase the electricity tariffs. Respondent‘s Exhibit 169. Claimants‘ Exhibit 37.

III. PARTIES' POSITIONS

A. APPLICABLE LAW

177.
Article 42(1) of the ICSID Convention provides that "[t]he Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties." In this connection, Article 8(4) of the Argentina-France BIT prescribes:

El órgano arbitral decidirá en base a las disposiciones del presente Acuerdo, al derecho de la Parte Contratante que sea parte en la controversia "incluidas las normas relativas a conflictos de leyes" y a los términos de eventuales acuerdos particulares concluidos con relación a la inversión como así también a los principios del Derecho Internacional en la materia.

In the French version, Article 8(4) provides:

L‘organe d‘arbitrage statuera, sur la base des dispositions du présent Accord, du droit de la Partie contractante partie au différend"y compris les règles relatives aux conflits de loi", des termes des accords particuliers éventuels qui auraient été conclus au sujet de l‘investissement ainsi que des principes de droit international en la matière.

In the English version, Article 8(4) provides:

The arbitration organization shall rule based on the provisions of this Agreement, on the laws of the Contracting Party that is a party to the dispute"including rules relating to conflicts of laws"and on the terms of any special agreements made in connection with the investment, and on the principles of International Law on the subject.

178.
Similarly, Article 12(7) of the Argentina-Luxembourg BIT provides:

El órgano arbitral decidirá en base al derecho de la Parte Contratante que sea parte en la controversia"incluidas las normas relativas a conflictos de leyes", en base a las disposiciones del presente Convenio y a los términos de eventuales acuerdos especiales concluidos con relación a la inversión, como así también según los principios del derecho internacional en la materia.

In French, the provision reads:

L‘organe d‘arbitrage statuera sur la base du droit de la Partie contractante partie au différend, y compris les règles relatives aux conflits de lois, des dispositions du présent Accord, des termes des accords particuliers éventuels qui auraient été conclus au sujet de l‘investissement ainsi que des principes de droit international en la matière.

In English, the provision reads:

The arbitration tribunal shall make a determination based on the laws of the Contracting Party that is a party to the dispute"including its conflict of law provisions"based on the provisions of this Agreement and the terms of any special agreements regarding the relevant investment, as well as in accordance with the applicable international law principles.

179.
The Parties are for the most part in accord that this case can and should be decided solely on the basis of the Argentina-France BIT.
180.
One exception to this acceptance of the Argentina-France BIT lies in connection with Respondent‘s affirmative defense asserted exclusively against Claimant León, namely that Article 3(2) of the Argentina-Luxembourg BIT applies to expressly exempt Argentina from any liability which might result from "... measures necessary to maintain public order[…]" See Claimants‘ Post Hearing Brief on Merits of 14 December 2009 at paragraphs 112-19; Respondent‘s Post Hearing Brief on Merits at paragraphs 280-83.
181.
Both Article 8(4) of the Argentina-France BIT as well as Article 12(7) of the Argentina-Luxembourg BIT constitute choice-of-law clauses pursuant to which the substantive legal tenets to be applied to disputes arising under the respective treaties are sourced in the investment instruments themselves, the national law of the Argentine Republic, any special investment agreement, and principles of international law on the matter. See Claimants‘ Memorial at paragraphs 314-5; Respondent‘s Counter Memorial at paragraphs 233-6; Respondent‘s Rejoinder of 27 July 2009 at paragraphs 190-3.
182.
Claimants contend that it is common ground that any lacunae in the Treaty must be resolved by resorting to international law in a manner which does not preclude Argentina‘s observance of international jus cogens norms. See Claimants‘ Reply at paragraph 247; Respondent‘s Counter Memorial at paragraphs 242-7. And that for Claimants to prevail in this arbitration, nothing short of a breach of those rights granted under the Treaty must be established. See Respondent‘s Counter Memorial at paragraphs 237-9. The Parties furthermore agree that other international arbitral awards are not binding on this Tribunal in the sense of stare decisis, but that such decisions are illustrative and relevant to the Tribunal‘s analysis. See Claimants‘ Reply at paragraph 133; Respondent‘s Rejoinder at paragraph 270.
183.
That being said, the Parties sharply diverge on (i) the relevance of Argentine law and judgments in defining the nature and scope of Claimants‘ treaty-based rights as well as in ascertaining the standards against which to measure the legal effects of Respondent‘s purported violation of said rights; (ii) the preemptive nature of international human rights laws which might have prohibited the observance of the Treaty; (iii) the existence of a special investment agreement; and (iv) the need to prove discrimination as a general prerequisite in establishing breaches of the Treaty.

1. Relevance of Argentine Law and Judgments

184.
Claimants press for a hierarchical approach, contending it is the Argentina-France BIT and customary international law which principally define the nature and scope of their treaty-based rights as well as set forth the standards against which any conduct in violation of those rights will be assessed. Consistent with this reckoning, Argentine law is relevant only as factual matters in the context of purely domestic aspects of the dispute. See Claimants‘ Reply at paragraphs 247-48, 253.
185.
Claimants‘ legal expert on Argentine administrative and constitutional laws, Dr. Alberto Bianchi, supports the soundness of Claimants‘ position, opining that the Argentine Constitution ranks treaties as superior to and overriding inconsistent local laws. See Bianchi Expert Report at paragraph 70; see also Claimants‘ Reply at paragraph 249. Moreover, Claimants maintain that, in the context of investment protections, the Treaty must be deemed to be lex specialis that trumps the lex generalis embodied in domestic law. See Claimants‘ Memorial at paragraph 316.
186.
On the other hand, Respondent asserts that Claimants‘ approach incorrectly marginalizes the relevance of Argentine law because the Treaty, national law and international law should not be applied in a mutually exclusive manner. See Respondent‘s Rejoinder at paragraph 198. In Respondent‘s view, foreign investors are entitled to exercise rights in accordance with circumstances existing in the host state, and in that respect, Argentine law is essential in determining the nature and scope of Claimants‘ treaty-based rights as well as in deciding whether a breach of such rights has occurred. See Respondent‘s Counter Memorial at paragraph 240. Respondent argues it is futile to discuss hierarchy under the Argentine Constitution, affirming that as concerns this proceeding not only is there an absence of any national law provision which might conflict with international obligations, but also there is no contradiction among the four categories of applicable tenets. See Respondent‘s Rejoinder at paragraphs 197, 202.
187.
Respondent insists the purpose of the Treaty is to provide international protection of certain property and shareholder rights Claimants acquired under the Concession Agreement, which in turn is urged to be governed by national law provisions that cannot be analyzed in isolation from the rest of Argentina‘s legal regime, in particular those domestic principles and rules germane to economic crises. See Respondent‘s Counter Memorial at paragraphs 240-1; Respondent‘s Rejoinder at paragraphs 195-6, 200-1.
188.
Respondent stresses that the Supreme Court of Argentina has ratified the validity of national emergency regulations almost one hundred years ago, as well as through subsequent recurrent pronouncements, thereby suggesting Claimants were well aware of (and therefore cannot be exempted from) the contours of Argentina‘s sovereign capacity during times of economic crises. See Respondent‘s Rejoinder at paragraph 202.
189.
In response, Claimants state that, for purposes of this proceeding, it is ultimately irrelevant whether the Argentine Supreme Court vests Respondent with robust authority during national economic crises or whether measures adopted under crises situations are consistent with such authority because all of Argentina‘s actions must be measured against a single international standard, that of the Treaty. See Claimants‘ Reply at paragraph 253. Notwithstanding, Claimants‘ legal expert, Dr. Bianchi, opines that the Emergency Tariff Measures are, in any event, unconstitutional. See Bianchi Expert Report at paragraph 217.
190.
Relying inter alia on Article 3 of the 2001 International Law Commission‘s Draft Articles on Responsibility of States for Internationally Wrongful Acts ("ILC Articles") as well as Article 27 of the 1969 Vienna Convention on the Law of Treaties ("Vienna Convention"), Claimants posit it is well-settled that a state cannot immunize itself from international responsibility by arguing that its actions complied with national law, and thus, the legality of acts of states under national law is not in any way determinative of lawfulness under international law. See Claimants‘ Memorial at paragraph 316; Claimants‘ Reply at paragraphs 250-2.

2. Preemption by International Human Rights Laws

191.
Although Claimants do not contest that Argentina‘s observance of the Treaty should not preclude observance of international jus cogens norms, Claimants argue Respondent is unable to demonstrate that any such norm is at issue in this case or, even if present, that it compelled the pesification and freeze of tariffs; the facts of this case neither show that compliance with the Treaty was rendered impossible, nor that the Treaty was rendered void, by virtue of a jus cogens norm. In Claimants‘ view, it is preposterous to suggest that any jus cogens norm required Argentina to repudiate Claimants‘ rights under the Concession Agreement or to rework the Regulatory Framework, or that Argentine citizens hold a supervening right to consume electricity at certain reduced prices. See Claimants‘ Reply at paragraph 266-67.
192.
Respondent disagrees, asserting it was necessary to enact the Emergency Tariff Measures in order to guarantee the free enjoyment of certain basic human rights "such as, inter alia, the right to life, health, personal integrity, education, the rights of children and political rights" which were "directly threatened by the socio-economic institutional collapse suffered by the Argentine Republic, where tens of people lost their lives, the right to health, to personal integrity, to work and safety." Respondent‘s Rejoinder at paragraphs 206, 208. Respondent‘s position is that obligations under investment treaties do not undermine obligations under human rights treaties, and thus, the Treaty should be construed and interpreted consistently with international canons aimed at fostering respect for human rights.
193.
Respondent argues Claimants‘ rights under investment treaties should not be deemed absolute to the detriment of the Argentine population‘s entitlement to universal human rights enshrined in international instruments such as the 1948 U.N. Universal Declaration of Human Rights, the 1966 U.N. International Covenant on Civil and Political Rights, the 1989 U.N. Convention on the Rights of the Child, and the 1969 American Convention on Human Rights. See Respondent‘s Rejoinder at paragraphs 205, 209. Respondent posits these latter multilateral pacts proscribe the abrogation or suspension in any situation of those rights contained thereunder; hence, the non-derogable nature of such rights is said to be conclusive evidence that they are tantamount to jus cogens. See Respondent‘s Counter Memorial at paragraph 246; Respondent‘s Rejoinder at paragraphs 209-10.
194.
Respondent‘s legal expert on international law, Dr. Monica Pinto, agrees, opining that "[t]he Government"whichever it were pursuant to the [American Convention]"was not supposed to suspend the exercise of human rights but to ensure of their satisfaction at reasonable levels." Pinto Expert Report at paragraph 69. As such, Respondent maintains that measures enacted to safeguard the free enjoyment of human rights should never result in international responsibility. See Respondent‘s Rejoinder at paragraph 212.
195.
According to Claimants, an international jus cogens norm is one that is "accepted and recognized by the international community of States as a whole as a norm from which no derogation is permitted and which can be modified only by a subsequent norm of general international law having the same character." See Claimants‘ Reply at paragraphs 263-4, quoting Vienna Convention, Article 53. Claimants contend that very few norms are recognized internationally as jus cogens "two illustrations being treaties on genocide or the legalization of slave trading"and that obligations do not elevate to jus cogens status just because the instruments Respondent cites, such as the American Convention on Human Rights, considers such duties to be non-derogable; for example, Claimants call into question the peremptory nature of Articles 17(5) and 18 of the American Convention, which respectively require children born in and out of wedlock to be treated equally and individuals to be allowed to adopt the surnames of one‘s parents. See Claimants‘ Reply at paragraphs 264-5.

3. Existence of Special Investment Agreements

196.
Respondent advances that no special investment agreements exist. See Respondent‘s Counter Memorial at paragraph 236; Respondent‘s Rejoinder at paragraph 193. As developed in the context of their claims discussed infra, however, Claimants argue otherwise. For example, in the context of indirect expropriation, Claimants contend that "for purposes of the BIT, the Concession Agreement is a concrete and legally binding specific commitment to the Claimants with respect to their investment." Claimants‘ Memorial at paragraphs 369.

4. Discriminatory Intent as a General Prerequisite

197.
According to Respondent, a showing that the measures were discriminatory is a requirement for Claimants to establish treaty breaches. See Respondent‘s CounterMemorial, at paragraph 553-54. In support of its view, Respondent cites to paragraph 146 of the Tribunal‘s Decision on Jurisdiction dated 5 August 2008. In this regard, Respondent asserts that for the Tribunal to now establish a different approach would be a serious departure from a rule of procedure and thus would take the Parties by surprise. See Respondent‘s Post-Hearing Reply on the Merits, at paragraph 2.
198.
In response, Claimants assert that such proposition has no basis in either the relevant treaty or the Tribunal‘s Decision on Jurisdiction as Respondent has taken the Tribunal‘s dicta out of content and has drawn spurious conclusions from it. Claimants Post-Hearing Brief on Merits, at paragraphs 69-71. Alternatively, Claimants argue that they have in fact demonstrated the discriminatory nature of the measures adopted by the Argentine authorities.

B. CLAIMS AND DEFENSES

199.
Claimants‘ position is that from the very outset of their investment in EDEMSA in 1998, the Province, by way of the Pre-Emergency Measures affecting the Concession, wrongfully chipped away at the Concession Agreement‘s legal framework until completely unraveling it with the enactment of the Emergency Tariff Measures in early 2002, at that time radically transforming the "rules of the game" for Claimants and consequently crippling EDEMSA‘s financial stability. See, e.g., Claimants‘ Memorial at paragraph 410. All the while the pesification and freeze of tariffs together with the repeal of the convertibility system destroyed EDEMSA‘s enterprise value the Emergency Tariff Measures explicitly obligated full compliance of the Concession Agreement throughout the duration of the Renegotiation Process, which Claimants argue was engaged in good faith on their part but turned out to be nothing more than a mere formality. See Claimants‘ Memorial at paragraphs 271, 410. As a result, the agreed upon economic and financial equilibrium contemplated under the Concession Agreement was never restored. See Claimants‘ Memorial at paragraph 271.
200.
Although conceding to the severity of the Argentine Economic Turmoil, Claimants posit that the Renegotiation Process was highly politicized and unwarrantedly so, marked by a lack of any real intent by the Province to reach a solution and resulting in no genuine progress during the three and a half so years that lapsed between its inception and the point Claimants finally decided to mitigate ongoing losses by selling their EDEMSA Class "A" shares. See Claimants‘ Memorial at paragraphs 206-11, 433. Claimants note that Article 2 of the Provincial Law mandated new concession terms to be drawn up within a six-month deadline, but that this time limit was subsequently extended on four occasions without affording any palliative recourse during the meantime for a period of thirty eight months. See Claimants‘ Memorial at paragraphs 270-1.
201.
In Claimants‘ view, the Pre-Emergency Measures affecting the Concession, the Emergency Tariff Measures, and the Renegotiation Process caused a level of injury to Claimants‘ investment in EDEMSA sufficient to support findings of breaches of Articles 3 ("Fair and Equitable Treatment"), 4 ("national treatment"), 5(1) ("full protection and security") and 5(2) ("indirect expropriation") of the Argentina-France BIT.
202.
Moreover, Claimants plead that Respondent‘s actions constitute violations of any standards of substantive protections afforded in investment treaties Argentina has entered into with third-party states that might be considered to be more favorable than those found in the Argentina-France BIT but subject nonetheless to incorporation therein by virtue of the most-favored-nation clause found in Treaty Article 4 ("MFN Clause"). See, e.g., Claimants‘ Memorial at paragraph 386. As such, Claimants contend Respondent also bears international responsibility for failing to respect specific commitments undertaken in connection with Claimants‘ investment as well as to abstain from resorting to discriminatory, arbitrary, unreasonable or unjustified measures. See Claimants‘ Memorial at paragraphs 441-8, 452.
203.
Claimants assess their damages to be US$ 7.2 million excluding interest on account of the Pre-Emergency Measures affecting the Concession, and at least US$ 123.9 million excluding interest on account of the Emergency Tariff Measures and the ensuing failure of the Renegotiation Process. See Claimants‘ Post Hearing Brief on Quantum of 11 March 2011 at paragraph 53; Claimants‘ Post Hearing Brief on Quantum at paragraphs 45-7.
204.
On the other hand, Respondent‘s position is that Claimants incorrectly construe the applicable legal standards; in particular, Respondent asserts the principle of ejusdem generis proscribes the MFN Clause from incorporating substantive protections of a kind not explicitly contained in the Treaty itself, such as the treaty-obligation to respect specific commitments undertaken in connection with investments of protected foreign investors. See Respondent‘s Counter Memorial at paragraphs 612-3.
205.
There is no dispute that the Emergency Tariff Measures abrogated certain material aspects of the Concession Agreement, including those provisions that incorporate by reference substantive terms set forth in the Regulatory Framework. See Claimants‘ Memorial at paragraphs 214, 269; Respondent‘s Counter Memorial at paragraphs 66-7. Notwithstanding, Respondent posits that, even if Claimants‘ construction of the law were to be correct, the facts do not support finding in favor of their claims because Claimants misunderstand the terms of the Concession Agreement and it is Claimants‘ own negligence and ill-performance that negatively affected the value of their investment in EDEMSA. See Respondent‘s Counter Memorial at paragraphs 206-208, 221. Rather, the Emergency Tariff Measures were legitimate means to conform to the Regulatory Framework‘s controlling principle of fair and reasonable tariffs as well as to safeguard the indigent class and to prevent hyperinflation. What is more, they actually helped EDEMSA weather the Argentine Economic Turmoil. See Respondent‘s Counter Memorial at paragraphs 402-8.
206.
As regards the Pre-Emergency Measures affecting the Concession, Respondent maintains these were justified exercises of EPRE‘s authority in its capacity as regulatory agency. See Respondent‘s Counter Memorial at paragraph 727. Concerning the fallout of the Renegotiation Process, Respondent argues that Claimants encountered nothing but good faith on the part of the Province and EPRE as opposed to Claimants themselves who demanded irreconcilable terms, and that Claimants knew as early as 2005 that a DAV increase would be implemented. As such, Claimants‘ decision to divest from EDEMSA was not prompted by any purported failure of the Renegotiation Process but instead for reasons wholly unrelated to issues of liability under the Treaty. See Respondent‘s Counter Memorial at paragraphs 213-28. In Respondent‘s view, the Renegotiation Process terminated successfully, and thus, all claims presented in this proceeding should be dismissed in their entirety. See Respondent‘s Post Hearing Brief on Merits at paragraph 170.

1. Respect for Specific Commitments

a) Treaty Framework

207.
Article 4 of the Argentina-France BIT, namely the so-called MFN Clause, provides in pertinent part:

Cada Parte Contratante aplicará, en su territorio y en su zona marítima, a los inversores de la otra Parte, en aquello que concierne a sus inversiones y actividades ligadas a estas inversiones, un tratamiento no menos favorable que el acordado a sus propios inversores, o el tratamiento acordado a los inversores de la Nación más favorecida si este último fuese más ventajoso. Por la misma razón, los nacionales de una de las Partes Contratantes autorizados a trabajar en el territorio y en la zona marítima de la otra Parte Contratante deberán poder gozar de las facilidades apropiadas para el ejercicio de sus actividades profesionales.

Ese tratamiento no se extenderá a los privilegios que una Parte Contratante acuerde a los inversores de un tercer Estado, en virtud de su participación o de su asociación a una zona de libre comercio, una unión aduanera, un mercado común o cualquier otra forma de organización económica regional.

Asimismo, este tratamiento no se extenderá a los privilegios que una Parte Contratante acuerde a los inversores de un tercer Estado, en virtud de un convenio para evitar la doble imposición o cualquier otro convenio en materia fiscal.

In the French version, the MFN Clause provides:

Chaque Partie contractante applique, sur son territoire et dans sa zone maritime, aux investisseurs de l‘autre Partie, en ce qui concerne leurs investissements et activités liées à ces investissements, un traitement non moins favorable que celui accordé à ses investisseurs, ou le traitement accordé aux investisseurs de la nation la plus favorisée, si celui-ci est plus avantageux. A ce titre, les ressortissants de l‘une des Parties contractantes autorisés à travailler sur le territoire et dans la zone maritime de l‘autre Partie contractante doivent pouvoir bénéficier des facilités appropriées pour l‘exercice de leurs activités professionnelles.

Ce traitement ne s‘étend pas aux privilèges qu‘une Partie contractante accorde aux investisseurs d‘un Etat tiers, en vertu de sa participation ou de son association à une zone de libre échange, une union douanière, un marché commun ou toute autre forme d‘organisation économique régionale.

De même, ce traitement ne s‘étend pas aux privilèges qu‘une Partie contractante accorde aux investisseurs d‘un Etat tiers, en vertu d‘une convention tendant à éviter la double imposition fiscale ou de toute autre convention en matière fiscale.

In English, the MFN clause reads:

Within its territory and in its maritime zone, each Contracting Party shall provide to the investors of the other Party, with respect to their investments and activities associated with such investments, a treatment no less favorable than that accorded to its own investors or the treatment accorded to investors of the most favored Nation if the latter is more advantageous. For the same reason, the nationals of either of the Contracting Parties authorized to work in the territory and in the maritime zone of the other Contracting Party shall be able to enjoy suitable terms for the conduct of their professional activities.

Such treatment shall not extend to the privileges that a Contracting Party grants to investors of a third State by virtue of its participation or its association with a free trade zone, a customs union, a common market, or any other form of regional economic organization.

Furthermore, such treatment shall not extend to the privileges that a Contracting Party grants to investors of a third State by virtue of an agreement to prevent double taxation or any other agreement covering fiscal matters."

208.
Claimants‘ position is that by virtue of the MFN Clause they are entitled to any substantive protections which might be considered to be more favorable than those contained in the Argentina-France BIT but are found in third-party investment treaties; one such protection being what shall be referred to herein as the "umbrella clause(s)," that is, the express treaty obligation of a host state to respect specific commitments undertaken in connection with investors of the counter-party contracting state. See Claimants‘ Memorial at paragraph 452.
209.
Article 10(2) of the Argentina-Luxembourg BIT, which Claimant León is noted to be able to invoke directly without having to rely on the MFN Clause, furnishes an "umbrella clause":

Cada una de las Partes Contratantes respetará en todo momento los compromisos contraídos con los inversores de la otra Parte Contratante.

In English, the provision reads:

"Each of the Contracting Parties shall respect at all times the commitments it has undertaken with respect to investors of the other Party."

210.
Likewise, the investment treaty concluded on 9 April 1991 between Argentina and Germany in Article 7(2) provides:

Cada Parte Contratante cumplirá cualquier otro compromiso que haya contraído con relación a las inversiones de nacionales o sociedades de la otra Parte Contratante en su territorio.13

In English, the provision reads:

"Each Contracting Party shall comply with any other commitment undertaken in connection with the investments made by nationals or companies from the other Contracting Party in the former‘s territory."

211.
Claimants moreover invoke Article 2(3) of the Agreement between the Government of the Hellenic Republic and the Government of the Republic of Argentina on the Promotion and Reciprocal Protection of Investments concluded on 26 October 1999, which provides that "Each Contracting Party shall observe any other obligation it may have entered into with regard to investments of investors of the other Contracting Party."
212.
According to Claimants‘ legal expert on international law, Dr. Rudolf Dolzer, as concerns to this case specific commitments undertaken in connection with Claimants‘ investment in EDEMSA are "contained in the national and provincial regulatory framework, and in the Concession Agreement." Dolzer Supplement Expert Report at paragraph 189. In paragraph 467 of their Reply, Claimants posit that, among those specific commitments the Province bargained to undertake as well as those implemented by law, particular emphasis should be given to Respondent‘s purported failure to respect: (i) the principles of the Regulatory Framework, including those governing the right to calculate and recalculate tariffs as well as those proscribing the unwarranted and unilateral modification of the Concession‘s legal framework; (ii) Claimants‘ right to fair and reasonable tariffs which produce reasonable rates of return for EDEMSA; (iii) Claimants‘ right to calculate tariffs in U.S. dollar terms as prescribed in the Currency Clause; (iv) Claimants‘ right to adjust tariffs for inflation based on U.S. producer and consumer price indexes as prescribed in the Cost-Adjustment Clause; and (v) Claimants‘ right to Ordinary Reviews every five years and Extraordinary Reviews in objective and justified circumstances.
213.
On the issue of applicability, Respondent sets forth a three-tier defense, asserting that (i) the principle of ejusdem generis effectively bars Claimants from invoking any "umbrella clauses," (ii) even if the scope of the MFN Clause is found to be able to incorporate "umbrella clauses," there are no specific commitments Claimants can base their claim on because the Concession Agreement was signed with EDEMSA, and thus, Claimants lack contractual privity, and (iii) even in the event the Tribunal were to find in favor of Claimants on counts (i) and (ii), applying "umbrella clauses" to enforce provisions set forth in the Concession Agreement would mean having to enforce the forum selection clause contained therein, which grants exclusive jurisdiction to the administrative courts of the City of Mendoza. See Respondent Rejoinder at paragraphs 541-2, 558-64; Respondent‘s Post Hearing Reply on the Merits at paragraph 109.
214.
According to Respondent, the MFN Clause is of a generic type subject to the principle of ejusdem generis, which in effect prohibits the incorporation of a new standard of protection into the Argentina-France BIT. See Respondent‘s Counter Memorial at paragraph 613. Quoting Article 9(1) of the U.N. Draft Articles on the Most Favored Nation Clause, titled "Scope of Rights under a Most-Favored-Nation Clause," Respondent presses that under the MFN Clause, Claimants acquire "only those rights that fall within the scope of the purpose of the clause." Respondent‘s Rejoinder at paragraph 541.
215.
Furthermore, Respondent suggests that the language of Treaty Article 8(1), namely the jurisdiction clause and which is formulated in terms of "[t]out différend relatif aux investissements, au sens du présent Accord,... [,]"14 should be construed to place claims based on treatment standards not expressly contemplated under the Argentina-France BIT as falling outside the authority of the Tribunal. In this respect, Respondent highlights that consent is a cornerstone of the arbitral process. See Respondent‘s Rejoinder at paragraph 545-46.
216.
As such, Respondent asserts that the MFN Clause is unable to incorporate "umbrella clauses" because the question of whether there has been a breach of such standards does not arise "in the sense of [the Argentina-France BIT]." See Respondent‘s Rejoinder at paragraph 544. In Respondent‘s view, "umbrella clauses" constitute exceptions to the fundamental principle of customary international law that a breach of a domestic law does not give rise to international responsibility, and exceptions by their very nature must be considered to be specifically negotiated. Respondent posits that the majority of investment treaties entered into by either France or Argentina does not provide "umbrella clauses." See Respondent‘s Rejoinder at paragraphs 550-55. What is more, any other interpretation would contradict the principle of effet utile "in other words, there would be no purpose of signing treaties not containing an "umbrella clause" if treaties concluded either prior or subsequent thereto in fact do. See Respondent‘s Rejoinder at paragraph 556.
217.
In response, Claimants contend that foreign investors have relied on most-favored-nation clauses to obtain more favorable substantive protections contained in investment treaties between the host state and third-party states since otherwise investors protected under third-party investment treaties would in fact receive more favorable treatment from the host state, which in Claimants‘ view is exactly what the MFN Clause proscribes. See Claimants‘ Reply at paragraph 459. Claimants‘ legal expert, Dr. Dolzer, agrees, opining that "umbrella clauses" should be found to fall within the scope of the MFN Clause because or else, "certain foreign investors would receive treaty protection with respect to specific commitments made to them in circumstances in which French investors would not, which would contradict the MFN guarantee provided by the France BIT." Dolzer Supplement Expert Report at paragraph 183.
218.
As concerns Respondent‘s second line of defense, Claimants‘ position is that contractual privity is not a prerequisite for invoking "umbrella clauses" because for starters, a literal interpretation of the standard supports the inference that obligations under the Concession Agreement and the Regulatory Framework constitute specific commitments undertaken in connection with Claimants‘ investments, and hence, are provisions that shareholders such as Claimants are entitled to enforce under the Treaty even if contractual privity is lacking and as a consequence thereof redress under Argentine law would have been precluded. See Claimants‘ Reply at paragraph 461.
219.
Dr. Dolzer for his part opines that the "umbrella clauses" in question are broadly worded and do not refer to contractual privity, requiring only "that the subject matter of the commitment concern the investment of a foreign investor." Dolzer Supplement Expert Report at paragraph 187. Claimants add that (i) provisions under concession agreements and local regulations become obligations subject to "umbrella clause" protection by virtue of being targeted at foreign investors and applying specifically to their investments, (ii) payment obligations are contemplated as well, and (iii) the inquiry is whether a contractual breach affects a right protected under the Treaty. See Claimants‘ Reply at paragraphs 463-5.
220.
In Claimants‘ view, the relationship between contracts and international investment law is well established: absent an "umbrella clause," if a host state acts as an ordinary commercial or contractual counterparty in breach of contractual obligations, then the state is answerable for its conduct only to its contractual counter-party according to the dispute resolution mechanism provided in the contract and consequently, generally not internationally liable. See Claimants‘ Reply at paragraph 317.
222.
On the other hand, Respondent asserts that specific commitments contemplated by "umbrella clauses" (i) are consensual obligations arising independently of investment treaties, (ii) are specific obligations concerning the investment, (iii) do not cover general requirements imposed by the law of the host State, (iv) are not entered into erga omnes but with regard to particular persons and whose performance occurs with regard to, and as between, obligor and obligee, (v) are obligations that do not transform into something else, as their content ‘is unaffected, as is its proper law and the parties are bound thereto, and (vi) are bilateral or intrinsically linked to obligations of the investment company, but nevertheless are not confused with such obligations, as a shareholder will not be bound by them. See Respondent‘s Rejoinder at paragraph 561. In sum, based on the foregoing factors, Claimants may not allege that the Province undertook specific commitments with respect to them as they are not parties to the instruments invoked. See Respondent‘s Rejoinder at paragraph 564.
223.
Notwithstanding, even if an "umbrella clause" were to apply to the present dispute, Respondent argues that the rights provided under the Concession Agreement or their legal consequences would remain unaffected, in particular the forum selection clause contained in Article 40 therein. As such, when the essence of a claim falls under the scope of a contractually-agreed forum selection clause, such stipulation should be respected. See Respondent‘s Rejoinder at paragraphs 565-68, 569.
224.
In Respondent‘s view, the maxim generalia specialibus non derogant dictates that a document containing a dispute settlement clause which is more specific in relation to the parties and to the dispute should be given precedence over a document of more general application, namely investment treaties, which are not concluded with any specific investment or contract in view but rather as a framework treaty intended to support and supplement, not to override and replace, the actually negotiated investment arrangements made between the foreign investor and the host state. See Respondent‘s Rejoinder at paragraph 570. Respondent notes that neither the Argentina-France BIT nor the ICSID Convention sets forth any provision which could prevail over forum selection clauses, and thus, if the Tribunal were to find "umbrella clauses" as applicable to the claims presented herein, the forum selection clause found in Article 40 of the Concession Agreement must be respected. Respondent‘s Rejoinder at paragraphs 570-4.
225.
Claimants contend that it is widely accepted that even where the facts of a dispute arise in connection with a contract, a foreign investor is still entitled to pursue treaty-based claims notwithstanding any contractual forum selection clause that might govern mere breach of contract claim. Claimants insist that local law might be relevant at most in assessing whether there has been a breach of the treaty since the breach of a commitment under national norms is an appropriate factor for consideration in determining whether the same act of state amounts to a treaty violation. Consequently, any overlap which might exist as regards the facts supporting a breach of contract claim and a corollary breach of treaty claim does not prevent a tribunal from considering the prevalence of the latter. See Claimants‘ Reply at paragraphs 393-94.
226.
Claimants reiterate that where an act of state reflects the exercise of quintessentially public or sovereign powers, then a treaty claim can be pursued completely independent of issues concerning contract breach. See Claimants‘ Reply at paragraph 398. In this respect, Claimants note that Respondent admits the Pre-Emergency Measures affecting the Concession were exercises of the Province‘s sovereign capacity and that there can be no doubt the Emergency Measures and the overseeing of the Renegotiation Process were so as well. See Claimants‘ Reply at paragraphs 402-3; Respondent‘s Counter Memorial at paragraph 702. Accordingly, it is not a matter of being disappointed in the performance of the host state in the execution of a contract, but rather whether an investor, whose contract rights are destroyed through the exercise of governmental prerogatives, is entitled to circumvent the operation of contractual forum selection clauses and head straight to claiming violations of investment treaties before an international arbitral tribunal. See Claimants‘ Reply at paragraphs 399-401.

b) Pre-Emergency Measures Affecting the Concession

227.
As mentioned earlier, Claimants have initially listed seven (7) Pre-Emergency Measures affecting the Concession whereas Respondent‘s defenses break them down into ten (10) categories. As discussed hereinafter the Tribunal finds substantial overlap which permits such measures to be considered most accurately under six (6) rubrics.
228.
Claimants assert that, from the very beginning of EDEMSA‘s concession, the Respondent altered the Regulatory Framework and Concession Agreement, negatively impacting EDEMSA‘s operations and finances. Claimants‘ Reply at paragraph 189. According to Claimants, Respondent‘s conducts caused a change to the financial equilibrium of the Concession Agreement in a way detrimental to EDEMSA. Moreover, all these measures discussed infra adversely affected the company‘s technical performance and made it increasingly difficult to meet the quality standards.
229.
In Respondent‘s view, Claimants‘ Pre-Emergency claims affecting the Concession pertain to measures under the regulatory authority of EPRE or the Government of Mendoza. Respondent asserts that the nature of the claims based on Pre-Emergency Measures affecting the Concession is strictly contractual and that Claimants have already brought said claims before local courts. Respondent‘s position is that the claims are subject to res judicata and pertain to matters foreign to the jurisdiction of this Tribunal. Respondent‘s Rejoinder at paragraph 777.
230.
Respondent argues that contractual renegotiation agreement was executed by EDEMSA and the Government of Mendoza, in which the parties agreed on a procedure to honor the outstanding payments due to EDEMSA as at 31 February 2005, including the NIHUIL IV non-payments. Respondent‘s Rejoinder at paragraph 778. According to Respondent, such agreement had been memorialized in the Letter of Understanding dated 7 April 2005. In this connection, Respondent argues that the Tribunal‘s finding in favor of Claimants with respect to these claims based on Pre-Emergency Measures affecting the Concession would result in double recovery.The Parties‘ dispute with respect to the Pre-Emergency Measures affecting the Concession can be categorized as follows.

(1) Modification of the Tariff Regime under the Concession Agreement

231.
Claimants assert that EPRE unilaterally altered the tariff regime under the Concession Agreement by modifying its fee structure and the contracting period applicable to large users as well as by wholly creating a new tariff category. See Claimants‘ Reply at paragraph 190.
232.
According to Claimants, it is uncontested that the Tariff Schedule under the Concession Agreement permitted EDEMSA to recuperate the additional costs incurred as a result from having to supply greater levels of power for large electricity users. See Claimants‘ Memorial, at paragraph 149; see Respondent‘s Counter-Memorial, at paragraphs 729-37. As such, the scheme was set forth in Anexo 1, Subanexo 1, Chapter 2, Subsection 3 of the Tariff Schedule in the Concession Agreement, establishing a fee for "Use of the Network" ("Network-Use Fee") as part of the tariffs applicable to large users. The Network-Use Fee was to be calculated based on the power capacity that had been installed and made available to each large user. Every twelve months, each large user would notify EDEMSA of the power capacity that it will require in the next twelvemonth period. The power capacity requested by and made available to each user determined the amount of the fee each user will pay for use of the network during the relevant twelve-month period. See Respondent‘s Counter-Memorial at paragraphs 729, 37.
233.
Claimants assert that it is uncontested that Resolution No. 8/98 established a fee structure different from that mentioned above in that the new fee calculation would be based on the last non-null power recorded by each user immediately prior to the beginning of the concession on 1 August 1998. Claimants‘ Memorial, at paragraph 151-52; Respondent‘s Counter-Memorial, at paragraph 736-37.
234.
The Parties, however, disagree whether EPRE‘s resolutions in relation to this tariff regime constitute unilateral modifications or instead legitimate exercise of authority by EPRE. See Claimants‘ Reply, at paragraphs 190-94; see Respondent‘s Counter-Memorial of 9 February 2009, at paragraph 727.
235.
Moreover, Claimants assert that Resolution No. 8/98 in effect allowed users to only pay for the yearly minimum of their electricity use rather than the maximum as originally contemplated in the Concession Agreement. See Claimants‘ Memorial, at paragraph 151. According to Claimants, the last non-null power usage immediately prior to the beginning of the concession would have been recorded in July, which was during the winter season in the southern hemisphere. Claimants‘ Reply, at paragraph 191. Claimants‘ witness, Mr. Gonella, attests that electricity consumption falls to its lowest level during the winter, and that EPRE regulations permitted large users to contract for their minimum use, regardless of the power capacity actually installed and made available to such users. See Supplementary Witness Statement of Héctor Gonella, at paragraph 13.
236.
In Respondent‘s view, such modification was consistent with the requirements of the Concession Agreement in order to ensure that the tariffs were just, proportional, and equitable. See Respondent‘s Rejoinder at paragraph 782. Respondent‘s witness, Mr. Sergio Rodríguez, opines that such modifications were sought in response to consumer complaints and applied in general to all power distributors in the province and not just to EDEMSA. See Witness Statement of Sergio Rodríguez, at paragraphs 33-42. Respondent further argues that this new tariff system was only applicable to new large users, as opposed to those pre-existing at the date of the Concession Agreement‘s execution. See Respondent‘s Counter-Memorial at paragraph 732. Mr. Rodríguez further opines that, given the existence of over 4,000 large users, the parties could not have expected the individual agreements with users to be completed by the time of service take over.15
237.
Claimants‘ witness, Mr. Gonella, seeks to undermine Respondent‘s argument by stating that EMSE in fact had at its disposition the exact figures of maximum energy consumption of each large user from the twelve months prior to the beginning of the concession.16 See Claimants‘ Reply at paragraph 193. Mr. Gonella further opines that, in light of these figures, EDEMSA could have easily projected each consumer‘s energy use for the following year.
238.
The second alleged modification imposed by EPRE concerns the reduction of the twelvemonth contracting period with large users. See Claimants‘ Memorial at paragraph 153. According to Claimants, Resolution EPRE No. 73/99 further modified the tariff regime by reducing the twelve-month contracting period to three months. See Claimants‘ Reply at paragraph 195. Claimants assert that at no time during the negotiating process prior to signing the Concession Agreement were periods of less than twelve months ever contemplated for calculating the Network-Use Fee. See Claimants‘ Reply at paragraph 197.
239.
Claimants argue that it is uncontested that in practice, Resolution 73/99 would allow large users with seasonable production cycles to pay EDEMSA for power capacity only during the months when each user actually makes use of the maximum power capacity, while paying lesser amounts during the remainder of the year when, due to lower levels of activity, separate contracts are entered for a lesser power capacity. See Claimants‘ Memorial, at paragraph 154; see Respondent‘s Counter-Memorial, at paragraph 744. Moreover, Claimants contend that it is undisputed that EPRE did in fact modify the duration of the contracts to be entered into with large users. See Claimants‘ Reply, at paragraph 195; see Respondent‘s Counter-Memorial, at paragraph 744
240.
The third modification asserted by Claimants regards the events leading to EPRE‘s imposition of a new category, referred to as the "Optional T-2" Tariff. See Claimants‘ Memorial at paragraph 168.
241.
As detailed above, the Tariff Schedule under the Concession Agreement provided for a temporary tariff, applicable to all users who at the beginning of EDEMSA‘s concession either (i) did not have the power measuring equipment appropriate for their classification level within the Tariff Schedule established by the Concession Agreement, or (ii) had yet to be classified under one of the categories provided in the Tariff Schedule. In such cases, the transitory tariff was to apply until the user was classified under a tariff category. The Concession Agreement required EDEMSA to complete the meter installation and user classification by specific deadlines, which, depending on the user‘s level of service demand, was either 6 or 12 months. See Claimants‘ Memorial at paragraph 168.
242.
According to Claimants‘ witness, Mr. Gonella, the Concession Agreement originally required that if the first reading with new digital readers exceeded 10kW, the user would be automatically categorized under the T-2 large user category, thereby being subject to the Network-Use Fee. See Supplementary Witness Statement of Hector Gonella, at paragraph 23.
243.
In August 1999, EPRE issued Resolution No. 125/99, which was later supplemented by Resolution No. 131/99. In Claimants‘ view, these resolutions effectively prevented EDEMSA from properly classifying the temporary tariff users. See Claimants‘ Memorial, at paragraph 167.
244.
Respondent admits that Resolution No. 125/99 permitted users whose consumption fell between 10 and 50 kW to continue with the original T-1 tariff category. See Respondent‘s Rejoinder, at paragraph 799. Claimants thus assert that EPRE wrongfully permitted modification of the tariff regime by permitting consumers to opt for the T-1 tariff category (applicable to small consumers) if successive readings showed power uses of less than 10kW; in effect, some large users could avoid the T-2 tariff classification so long as later monthly readings fell below the threshold level. Claimants‘ Reply at paragraph 199.
245.
Claimants argue that it is uncontested that Resolution No. 131/99 suspended payment obligations of those users which had already been reclassified or were about to be reclassified as T-2 large users, and mandated refund of any and all monies that may have been billed in excess due to their reclassification. See Claimants‘ Reply, at paragraph 199; see Respondent‘s Rejoinder, at paragraph 801. In addition, Resolution No. 131/99 required EDEMSA to resend invoices to every user which had been reclassified under the T-2 tariff category. The revised invoices were to be based on the tariff class which was in force prior to their reclassification. Such recalculation was required from the date on which the reclassified tariffs were implemented. Claimants contend that it is undisputed that the transitory tariff was later extended for one year until 31 July 2000.
246.
In defense, Respondent argues that Resolutions No. 125/99 and 131/99 were issued in the interest of the electricity consumers. According to Respondent, the former was enacted provided that the application of the Measurement Normalization Plan under Chapter 5, subsection 2 of the Tariff System was inadequate, resulting in only a series of measures aiming at safeguarding the information rights of users. Respondent further asserts that the latter resolution was established as a precautionary measure. See Respondent‘s Rejoinder at paragraph 800-1.
247.
In addition, Claimants argue that despite expiration of the one-year extension, the Governor of Mendoza issued Executive Order No. 1632/00, which unilaterally incorporated the transitory tariff into the Concession Agreement as a new tariff category. See Claimants‘ Memorial at paragraph 168. This order was to be in force from 1 August 2000 to 31 July 2003.
248.
On 13 September 2000, EDEMSA filed an administrative action before the Supreme Court of Mendoza challenging the constitutionality of Decree No. 1632/00. Parties disagree whether a decision has been rendered by the Supreme Court of Mendoza with respect to EDEMSA‘s challenge of 13 September 2000.
249.
Claimants contend that it is undisputed that Executive Order No. 1632/00 provided all users who had benefited from the transitory tariff the option to remain within such class, identified as the "Optional T-2" category, or to be reclassified into a new category based on their actual power consumption. Claimants‘ Reply, at paragraph 200; see Respondent‘s Rejoinder, at paragraphs 802-6.
250.
The Parties, however, disagree whether the "Optional T-2" Tariff was to include a fee for the use of the network. See Claimants‘ Memorial, at paragraphs 168-69; see Respondent‘s Rejoinder, at paragraphs 808-10.
251.
Claimants assert that this new tariff category in effect allowed certain commercial users the option to avoid paying the Network-Use Fee, which had been originally agreed to apply when a users maximum power demand exceed an average of 10kW per periods of fifteen consecutive minutes. See Claimants‘ Memorial at paragraph 165.
252.
Moreover, Claimants argue that Respondent‘s arguments as to equity and the need to protect certain groups of consumers are wholly irrelevant in the present case. Claimants‘ Reply at paragraph 202. Rather, EPRE was simply not authorized by the Concession Agreement to implement such unilateral modifications. This resulted in substantial harm to EDEMSA, for which it was not compensated.
253.
In response, Respondent argues that users classified under the Optional T-2 Tariff were not exempt from paying the Network-Use Fee and that this tariff category was not lower than the electricity actually being consumed. See Respondent‘s Rejoinder at paragraph 808. Respondent‘s witness, Mr. Rodríguez, opines that although the Optional T-2 and the regular T-2 tariffs were calculated by way of different methods, both compensated for all costs related to the provision of the service, that is, the DAV and the procurement cost. See Rebuttal Witness Statement of Sergio Rodríguez, at paragraphs 60-61. According to Mr. Rodríguez, the optional tariff set forth a variable charge, which resulted in increases in the amount billed as power usage increased.

(2) Expansion of the Scope of the Concession Area

254.
Claimants assert that EPRE unilaterally expanded the scope of the Concession Agreement by incorporating therein the town of Polvaredas as well as the Scattered Market without adequate remuneration in exchange. See Claimants‘ Memorial at paragraphs 158-63.
255.
Claimants suggest that it is common ground that these categories comprise of users located in remote regions that are not linked to the interconnected distribution network. Claimants‘ Memorial, at paragraphs 160, 162; see Respondent‘s Counter-Memorial, at paragraphs 752-53, 757.
256.
Claimants contend that it is undisputed that the area of Polvaderas was not transferred to EDEMSA upon commencement of the concession as this region was self-serviced by a generation equipment. See Claimants‘ Memorial, at paragraph 160; see Respondent‘s Counter-Memorial, at paragraph 753. According to Claimants, it is uncontested that, after an incident resulting in damages to the generation equipment and thus halt of power services to the Polvaderas inhabitants, Resolution EPRE No.183/99 was issued, expressly incorporating the town of Polvaredas into EDEMSA‘s area of concession. In addition, Claimants argue that it is undisputed that, on 3 December, 1999, the Government of Mendoza issued Provincial Decree No. 2379/99, expressly incorporating into EDEMSA‘s area of concession the Scattered Market. Claimants‘ Reply, at paragraph 211; see Respondent‘s Counter-Memorial, at paragraph 757.
257.
In defense, Respondent argues that such isolated areas are deemed public service and thus serve as an integral part of EDEMSA‘s distribution services. See Respondent‘s CounterMemorial at paragraphs 754, 759-60. In support, Respondent cites to Article 2 of the Concession Agreement, which obliged the concessionaire "to satisfy in whole the demand for electricity service within the Area...." Respondents Counter-Memorial at paragraph 759. In turn, the Definitions section of the Concession Agreement defined "Area" in a way so as to establish "the scope within which CONCESSIONAIRE is obliged to render the PUBLIC SERVICE and cover the increase in the demand as provided for in this Agreement, including the areas defined in the regulation of [the Transformation Law] and Annex I of the Bidding Conditions." In this connection, Respondent cites to the definition of "area of exclusivity" under the Concession Agreement. See Respondent‘s Counter-Memorial, at paragraph 760. Respondent‘s position is that both Polvaderas and the Scattered Market fall under the scope of "public service", as the terms of the Concession Agreement require EDEMSA to cover the increase in demand within the area of concession. Respondent‘s Counter-Memorial at paragraphs 759.
258.
Moreover, Respondent notes that the Mendoza Supreme Court recognized the need to compensate EDEMSA as the Polvaredas area was delivered to Claimants after their taking of possession. In this connection, Respondent concedes that EDEMSA was to be compensated through the PTC Fund, in order to balance the difference in distribution costs. Respondent further posits that Mendoza undertook the responsibility of providing Polvaredas with the fixed material needed for power supply, without EDEMSA having to invest money for such purpose. Respondent‘s Rejoinder at paragraph 791-92.
259.
Claimants respond by asserting that the documents presented during the due diligence process, though making reference to the distribution system, fails to mention inclusion of isolated populations located in areas such as Polvaredas or the Scattered Market. See Claimants‘ Reply at paragraph 206, 213.
260.
Citing to paragraph 755 of Respondent‘s Counter-Memorial, Claimants assert that Respondent‘s own admission of the need to compensate EDEMSA for additional costs incurred in relation to services in the Polvaredas area further supports Claimants‘ view that the isolated regions were never considered as part of the Concession Agreement. See Claimants‘ Reply at paragraph 207. Had such area been included prior to the concession, extra compensation would not have been required. Furthermore, Claimants assert that, had Polvaredas been included in the area of concession, there would have been no need for EPRE to issue Resolution No.183/99. See Claimants‘ Reply at paragraph 208. Claimants further argue that despite recognizing the need for compensation, Respondent has never provided compensation or reimbursement in this connection. See Claimants‘ Reply at paragraph 209.
261.
With respect to the Scattered Market, Claimants further assert that EDEMSA was denied the right to charge certain local users located in small rural communities with their own electricity generation equipment and local low voltage distribution network (referred to as "collective users") as well as those connected to a secondary network consisting of a single wire used for transmission purposes (referred to as "monofilar"). Claimants‘ Memorial at paragraph 163. According to Claimants, Provincial Decree No. 2379/99 further burdened EDEMSA by requiring it to apply to the Scattered Market the same stringent quality of service that applied to users within the interconnected distribution network. See Claimants‘ Memorial at paragraph 163. Claimants‘ witness, Mr. Gonella, posits that this new contractual obligation resulted in an increase in cost to EDEMSA. See Supplementary Witness Statement of Hector Gonella, at paragraph 46.
262.
In response, Respondent cites to Mr. Rodríguez, who opines that "tariffs were expressly regulated in Schedule 1.2 of [Decree No. 2379/99], which established a regime of subsidies and compensations payable to the Concessionaire."17 See Respondent‘s Rejoinder at paragraph 797.

(3) Modification of Agricultural Subsidy Regime

263.
Claimants assert that EPRE changed the original subsidies regime that had been established for the benefit of agricultural irrigation users. See Claimants‘ Memorial at paragraphs 192-95.
264.
Claimants contend that it is undisputed that the Transformation Law set forth a mechanism for subsidizing the electricity consumption by certain agricultural users for irrigation purposes. Claimants‘ Reply, at paragraph 214; see Respondent‘s Rejoinder, at 822. The Transformation Law mandated the application of a special tariff schedule to all agricultural irrigation users existing at the time the Regulatory Framework was passed. Under this system, EDEMSA was to be compensated for the difference between the subsidized tariff, referred as the "Reference Tariff", and a benchmark tariff, known as the "Tariff Payable to Distributor." Under Article 36 of the Transformation Law, all amounts due to EDEMSA were to be paid out from the PTC Fund.
265.
This subsidy mechanism implemented by the Transformation Law was incorporated into EDEMSA‘s Concession Agreement. Claimants‘ Reply, at paragraph 214; see Respondent‘s Rejoinder, at 822. Accordingly, Chapter 2 of the Tariff Schedule in the Concession Agreement set forth the government‘s obligation to compensate EDEMSA for the difference that may exist between the amounts billed to the beneficiaries of the subsidy and those that would result from the application of the "Tariff Payable to Distributor." See Respondent‘s Rejoinder at paragraph 822.
266.
The Parties disagree as to whether, under this subsidy framework, EDEMSA was required to deposit back into the PTC Fund any excess amount in instances where the "Reference Tariff" resulted in a higher amount than that from the "Tariff Payable to Distributor." See Claimants‘ Reply, at paragraph 216; see Respondent‘s Rejoinder at paragraph 828.
267.
According to Claimants, such regime was altered by EPRE preventing EDEMSA from collecting on excess amounts in instances where the "Reference Tariff" resulted in a higher amount than that from the "Tariff Payable to Distributor." See Claimants‘ Memorial at paragraph 194-95. In this connection, Claimants argue that nowhere in the Concession Agreement was there a requirement that EDEMSA reimburse the PTC Fund under the concerned scenario.
268.
Claimants assert that said subsidy only applied to those agricultural users whose consumption was during hours of lowest demand. Claimants‘ Reply at paragraph 215. Consequently, Claimants were justified in charging the T-2 Tariff category for those users that failed to meet the aforementioned criterion for agricultural subsidy benefits. In this connection, Claimants argue that EDEMSA in fact did not charge a "Reference Tariff" higher than the "Tariff Payable to Distributor," but rather simply applied the T-2 Tariff in those situations. See Claimants‘ Reply at paragraph 217.
269.
In defense, Respondent asserts that EDEMSA was not entitled to charge agricultural users a fee higher than the one under the Concession Agreement. See Respondent‘s Rejoinder at paragraph 821. Rather EDEMSA had agreed to collect the "Tariff Payable to Distributor" in relation to agricultural irrigation users, and thus that any excess resulting from the difference with the Reference Tariff should have been deposited back into the PTC Fund. See Respondent‘s Rejoinder at paragraph 823, 828. In support of such view, Respondent cites to Mr. Rodríguez‘s statement, opining that such procedure was implied in the subsidy framework. See Respondent‘s Rejoinder at paragraph 82627.18 Respondent‘s witness, Mr. Faura, posits that the subsidy was not restricted to those agricultural users that consume during low-demand hours. Rebuttal Witness Statement of Raul Faura, at paragraph 48. Rather, the agricultural subsidy framework contemplated both low and high hours of demand while merely encouraging consumption during the former by establishing different pricing structures.
270.
In support, Respondent cites to Article 36 of the Transformation Law, which, in pertinent part, state that "[t]he collection of this compensation shall only be applied to electrical power users for agricultural irrigation to the date of enactment of this law, in accordance with the regulations, and such compensation shall be gradually allocated in relation to the higher efficiency in the use of surface and ground water for agricultural irrigation...." See Respondent‘s Rejoinder at footnote 946. Respondent‘s witness, Mr. Faura posits that the agricultural subsidy framework simply encouraged consumption during low-demand hours by providing different prices for low- and high-demand hours. See Rebuttal Witness Statement of Raul Faura, at paragraph 48.

(4) Failure to Pay Amount Owed

271.
Claimants contend that the Government of Mendoza refused to make payment owed to EDEMSA under two situations, both of which were explicitly contemplated in the Concession Agreement. Claimants‘ Reply at paragraph 221.
272.
First, Claimants assert that EDEMSA was owed reimbursement for extra costs incurred in purchasing power from the Nihuil IV power plant. Claimants‘ Reply at paragraph 222.
273.
According to Claimants, it is common ground that Article 37 of the Transformation Law mandated the assignment of EMSE‘s rights and obligations arising out of a contract entered into with a power generation company, Hidronihuil S.A. Claimants‘ Memorial at paragraph 172; see Respondent‘s Counter-Memorial at paragraphs 777-83. The Nihuil IV Contract was for the construction, operation and maintenance of a hydroelectric power plant known as NIHUIL IV. The Nihuil IV Contract provided, inter alia, for a commitment by EMSE to purchase all of the Nihuil IV power plant‘s output at a price higher than that available in the Electricity Wholesale Market. Article 37 of the Transformation Law established that "[t]he difference between the price that EDEMSA must pay pursuant to this contract and the purchase value of energy in the electricity wholesale market, shall be compensated to EDEMSA by the Province with funds allocated pursuant to Article 47."
274.
In conformity with Article 37 of the Transformation law, Article 22.36 of the Concession Agreement memorialized said compensation scheme. In return for servicing a loan obtained by EMSE for purposes related to the construction of the NIHUIL IV, EDEMSA would receive monthly payments of the difference between the NIHUIL IV price and the going market price.
275.
Claimants assert that it is undisputed that, in February 2000, the Government of Mendoza stopped making payments to EDEMSA for the compensation provided under Article 37 of the Transformation Law and Article 22.36 of the Concession Agreement. Claimants‘ Reply at paragraph 222; see Respondent‘s Counter-Memorial at paragraphs 777-83.
276.
According to Claimants, EDEMSA made numerous requests for payment over the course of almost a year, but faced substantial delays and unusual administrative proceedings. See Claimants‘ Memorial at paragraph 176; see Claimants Reply at paragraph 223. Moreover, Claimants assert that they were unable to seek recourse in the Supreme Court of Mendoza, which found that it lacked jurisdiction by reason that all administrative proceedings had not been terminated. See Claimants Reply at paragraph 223.
277.
Second, Claimants argue that EDEMSA was owed reimbursement and compensation for certain subsidized tariffs as well as for public lighting services. Claimants‘ Reply at paragraph 224.
278.
Claimants contend that it is uncontested that the Tariff Schedule contained in the Concession Agreement provided for the application of subsidized tariffs for specific users (e.g., the elderly, those engaged in agricultural irrigation) and certain sectors (e.g., rural areas). See Claimants‘ Memorial, at paragraph 184; see Respondent‘s Rejoinder, at paragraphs 818-19. The Tariff Schedule established that the difference in amount resulting from the subsidy was to be reimbursed to EDEMSA through the PTC Fund. In accordance with the Concession Agreement, Claimants submitted monthly statements before EPRE, itemizing the amounts due by the Government.
279.
Claimants contend that it is undisputed that since August 1999, the provincial government has failed to make payments owed, including compensation for the above-mentioned subsidy as well as for the provision of the public lighting services. See Claimants‘ Memorial, at paragraph 186; see Respondent‘s Rejoinder, at paragraphs 81819.

(5) Quasi-Currency

280.
Claimants assert that EDEMSA was forced to accept payments from its customers with notes issued by the Province‘s treasury. Claimants‘ Reply at paragraph 218. According to Claimants, these notes were issued in lieu of monetary currency, which further hindered EDEMSA‘s ability to satisfy its own monetary obligations.
281.
In response, Respondent states that these notes could in fact be used to satisfy taxes and other obligations owed to the provincial government. Respondent‘s Rejoinder at paragraph 835. Respondent contends that during times of economic crisis, the Governor of California also had issued similar bonds called IOUs. Respondent‘s Rejoinder at paragraph 834. Respondent argues that the bonds were ultimately redeemed by the Province at 110.4904% of their nominal value. Respondent‘s Rejoinder at paragraph 837.
282.
Notwithstanding, Claimants contend that such unilateral conduct by Respondent was unfair, as it was not only unforeseeable within the Concession Agreement but also contrary to the tariff principles set forth in the Regulatory Framework. See Claimants‘ Reply at paragraph 219.
283.
According to Claimants, such unilateral conduct by Respondent caused EDEMSA to face cash flow problems. Claimants contend that EDEMSA was forced to purchase cash in exchange for these notes, for which EDEMSA was able to receive only 80% of the notes‘ face value, thereby resulting in a 20% loss. See Claimants‘ Reply at paragraph 220.

(6) Imposition of Service Quality Conditions

284.
Claimants assert that Provincial Law No. 6856 imposed obligations and conditions more onerous than those originally provided for in the Regulatory Framework. In particular, Claimants advance Sections 2 through 6 of Law No. 6856, which set forth procedures for the filing of claims against EDEMSA by users who allege damages due to failures in the electricity distribution system.
285.
According to Claimants, Section 2 eliminated the requirement to file an administrative claim in the first instance, thereby enabling users to resort directly to local courts. Section 5 directed courts to increase by fifty percent any damages award against EDEMSA in the event that EDEMSA challenges the merits of the claim or the existence of the alleged failure in the system. Section 6 established that the failure to comply with a damages award is tantamount to a "severe breach."
286.
In response, Respondent clarifies that Provincial Law No. 6856 in fact was applicable to every concessionaire and any type of public services‘ providers, whether on the national or provincial level. Respondent further argues that it was Claimants failure to mention that these allegations were submitted to the decision of the Supreme Court of Mendoza, which, on 10 August 2005, dismissed such action. See Respondent‘s Counter-Memorial at paragraph 801-802. Following the Mendoza Supreme Court‘s decision, Claimants have no grounds to affirm the unconstitutionality of the regulations, given the court found them consistent with the principles set forth in Articles 41, 42 and 43 of the Argentine Constitution. Respondent‘s Rejoinder at paragraph 803.

c) Emergency Laws and Renegotiation Process

287.
Claimants assert that Respondent has violated the specific commitments undertaken in connection with Claimants‘ investment by breaching the terms of the Concession Agreement. In support, Claimants cite to several ICSID decisions that have ruled in the investor‘s favor in this regard, including the Sempra, Enron and CMS Gas cases.
288.
As discussed supra, Claimants contend that it is undisputed that the Emergency Measures abrogated the fixed-exchange regime provided under the Convertibility Law as well as invalidated key provisions in the Concession Agreement, in particular the Currency Clause and Cost-Adjustment Clauses. See Claimants‘ Memorial at paragraphs 206-11; Respondent‘s Counter Memorial at paragraphs 63, 66-7. In this connection, Cliamants state that it is also common ground that EDEMSA, while under the control of Claimants in their capacity as shareholders, and pursuant to the price cap system, had the duty to make necessary investments for the maintenance and expansion of the service, and as such, EDEMSA could only enhance its profitability by lowering costs and increasing efficiency rather than through the increase of tariffs. See Claimants‘ Memorial at paragraphs 117, 358; Respondent‘s Counter Memorial at paragraphs 167, 357.
289.
The Parties disagree, however, as to who bears the currency risk, the applicability of tariff principles embodied in the Concession Agreement during the Argentine Economic Turmoil, the justifiability of the Emergency Tariff Measures, the real causation behind the destruction of EDEMSA‘s value as of December 2001, and who lacked good faith during the Renegotiation Process as well as the outcome thereof.
290.
Claimants contend that the Concession Agreement, which incorporates by reference the provisions of the Provincial Electricity Law, sets forth the terms and conditions of the concession granted to EDEMSA, including mechanisms to protect the concessionaire against currency risk, inflation, and political and regulatory risks. See Claimants‘ Memorial at paragraph 97.
291.
First, Claimants‘ position is that the Currency Clause, by establishing the calculation and recalculation of tariffs in U.S. dollar terms, allocates to the Province any risk associated with currency fluctuations between the U.S. dollar and the Argentine peso. According to Claimants, despite the seven-year reign of the fixed-exchange system under the Convertibility Law by the time the EDEMSA shares were being promoted, concern over the sustainability of that system as well as over the stability of the Argentine currency lurked among foreign investors, and thus, the assumption of currency risk by part of the Province was essential in comforting any such apprehensions. See Claimants‘ Memorial at paragraphs 103-4.
292.
Claimants posit that other reasons underlie their position, including the fact that many investment costs were to require payments in U.S. dollars, such as the purchase of equipment only available outside of Argentina, and because assuming debt in U.S. dollars would allow long-term debt financing from the international capital markets at lower interest rates. As such, the Province would benefit from operational efficiencies resulting eventually in lower tariffs and improved service at every tariff review. To protect the investor from inflation risks, Claimants argue that the Cost-Adjustment Clause provided for a mechanism to maintain the real value of tariffs constant. See Claimants‘ Memorial at paragraph 105-108.
293.
Second, Claimants posit that the Province was aware of the harmful effects that politically-motivated tariff policies have, and accordingly, made it explicit under the Provincial Electricity Law that guarantees of long-term political and regulatory stability was being implemented for the Concession Agreement. See Claimants‘ Memorial at paragraph 100, 109. Claimants emphasize that tariffs were to be determined on the basis of economic criteria and were to afford the concessionaire sufficient income to cover all costs associated with the distribution of electricity as well as to obtain a reasonable return on the any investments made in that connection. See Claimants‘ Memorial at paragraphs 109-12. Claimants argue that the Concession Agreement contemplates tariff schedules of five-year terms subject to interim modification only on grounds of significant variations in the cost structure of the distributor caused by unforeseen events beyond the control of the Parties, and at the expiration of such term, subject to revision only in conformity with pre-determined procedures in order to augment the stability of the Regulatory Framework. See Claimants‘ Memorial at paragraphs 114-20.
294.
According to Claimants‘ expert on quantum, LECG, "[t]he use of individualized contracts, as opposed to simply using regulatory frameworks based on general legislation, grants investors an additional protection against governmental opportunistic behavior, as general regulatory frameworks can be changed by new legislation, while changing contracts require, in principle, the agreement of both parties to the contract." See LECG Expert Report at paragraph 46.
295.
In Claimants‘ view, the foregoing panoply of protections made EDEMSA an attractive investment prospect, which as a matter of fact, was relied on heavily when Claimants decided to invest in the Province. See Claimants‘ Memorial at paragraph 121. Claimants argue that the Emergency Tariff Measures imposed drastic changes in the tariff regime so as to fundamentally alter the economic equation of the Concession Agreement, thereby severely affecting Claimants‘ investment. See Claimants‘ Memorial at paragraphs 115, 214.
296.
Claimants argue that the Emergency Tariff Measures (i) caused a de facto freeze on the tariffs, thus depriving Claimants from their contract protection under the Cost-Adjustment Clause against inflation risks and the consequent loss of value of revenues over time, and (ii) pesified tariffs so as to require by law the conversion of dollar-denominated tariffs into peso-denominated tariffs at a ratio of 1 to 1 despite the exchange parity of the market of US$ 1 to ARS 3 following the abrogation of the Convertibility Law. See Claimants‘ Memorial at paragraphs 214-5.
297.
Claimants illustrate that, whereas prior to the Emergency Laws, when consumer bills were calculated in U.S. dollars and then converted to pesos for purposes of billing, the calculated bill in U.S. dollar terms would equal the billing invoice denominated in peso terms because the Convertibility Law fixed an exchange rate of 1:1, the enactment of the Emergency Tariff Measures skewed this formula so as to force the same billing invoice amount in peso terms even though the fixed convertibility system had been scrapped and the peso had consequently floated and devalued three-fold. Consequently, Claimants state that the value to the concessionaire of the billing invoice charged to the consumer would be worth only a third of what it had been prior to 2002, thereby depriving Claimants of the fundamental protections provided under the Concession Agreement against currency risk. What is more, the Emergency Tariff Measures also required EDEMSA to abide by its contractual obligations, thus creating an asymmetry that further exacerbated injury to Claimants‘ investment during the thirty-eight months in which the Renegotiation Process took place. See Claimants‘ Memorial at paragraphs 216-20.
298.
Claimants‘ position is that their investment incurred devastating damages by reason of the Emergency Tariff Measures that can be inferred from the sharp drop of 32% in the revenues of private entities, which in turn resulted in the reduction of cash flows to a level insufficient to cover operational costs, taxes and interest payments, in the depreciation of equity value, in the default of commercial debt, and in the reduction of investments for improving infrastructure. See Claimants‘ Memorial at paragraph 246. Claimants contend that the pesification and freeze of tariffs combined with the rapid devaluation of the peso caused EDEMSA‘s revenues to drop drastically, in U.S. dollar terms, to practically one-third of its value prior to 2002 all the while EDEMSA‘s costs experienced sharp increases due to inflation, thereby creating a severe imbalance between revenues and operational expenses. See Claimants‘ Memorial at paragraph 252. According to Claimants, the Emergency Tariff Measures are directly responsible for reducing EDEMSA‘s operating profits by 75% in 2002, instigating EDEMSA‘s default of debts financed in U.S. dollar terms, and diluting the value of equity. See Claimants‘ Memorial at paragraphs 253-9.
299.
Respondent‘s position is that the mechanisms provided under the Concession Agreement operate according to the economic, monetary and social conditions existing at the time of contract, and that neither the Concession Agreement nor the Regulatory Framework supplied appropriate means to restore the balance between the rights of the concessionaire and those of the users during the Argentine Economic Turmoil. As such, Respondent asserts the tariff system contemplated under the Concession Agreement was inapplicable both from economic as well as legal angles, for enforcing them would have destroyed the principle of fair and reasonable tariffs and caused serious damages to the Province, EDEMSA, and the users. See Respondent‘s Counter Memorial at paragraph 401-403. Respondent‘s regulatory expert, Mr. Alejandro Sruoga, agrees, opining that the Argentine Economic Turmoil altered the expectations incorporated in the Concession Agreement, thus suggesting a justification for abandoning the protection mechanisms thereunder. See Sruoga Expert Report at paragraphs 128-31.
300.
In Respondent‘s view, the Currency Clause established a direct and indissoluble link between the Convertibility Law and the Concession Agreement, whereby only a change in the exchange rate parity under the Convertibility Law would be taken into account and not the total repeal of the Convertibility Law so as to implement a completely different monetary system. See Respondent‘s Counter-Memorial, at paragraphs 435-41. Respondent argues that Claimants are wrong in construing the Currency Clause so as to have the Province bear the currency risk since EDF acknowledges in a Plan Directeur dated 31 March 1998 that, upon the abandonment of convertability, the Currency Clause does not anticipate what would happen in a crisis scenario. See Respondent‘s CounterMemorial, at paragraph 442. That document states in pertinent part:

Tant que la convertibilité US$/Peso est garantie par la loi, la formule d‘ indexation couvre correctement le risque de change. En revanche dans un scénario de crise du Peso, le décret 2118/1991 pourrait alors être amendé. Dans ce cas, la formule ne prévoit pas le risque du taux de change réel du peso, phénomène qui se produit normalement après un subite dévaluation.

301.
The Parties, however, disagree on the correct English translation. Claimants‘ translation reads as follows:

As long as US$/Peso convertibility is guaranteed by law, the indexation formula adequately covers the exchange risk. However, in a scenario of crisis of the Peso, decree 2128/1991 could then be amended. In that case, the formula does not contemplate the risk of appreciation of the real exchange rate of the peso, a phenomenon that normally occurs after a sudden devaluation ("tequila effect").

302.
In contrast, Respondent‘s version states as follows:

As long as the dollar/peso convertibility is guaranteed by law, the indexation formula adequately covers the exchange risk. Quite the opposite, in a scenario of the crisis of the peso, Decree No. 2128/1991 could thus be modified. Consequently, the formula does not foresee the risk of modification of the real exchange rate of the peso, which normally occurs after a sudden devaluation (tequila effect).

303.
Moreover, Respondent posits that the maintenance of the Currency Clause, the Cost-Adjustment Clause, and other tariff terms tailored into the Concession Agreement would have extinguished the principle of fair and reasonable tariffs, which Respondent insists is the single means for safeguarding the interests of supplier companies and service users. See Respondent‘s Counter-Memorial, at paragraph 443. Respondent states that Claimants‘ regulatory expert, former Secretary of Energy for the Argentine Republic, Mr. Carlos Bastos, agrees with Respondent‘s position and recognizes that calculating tariffs at the average floating-exchange rate of 1 US$ for 1 ARS would have led to increases in billing invoices by three-fold, in turn resulting in service theft and payment delinquencies. See Respondent‘s Counter-Memorial, at paragraphs 444-6, citing Bastos Expert Report at paragraphs 196-7; see also Sruoga Expert Report at paragraphs 122-4. In the words of Respondent‘s legal expert, Professor Ismael Mata, in a scenario where the Convertibility Law was repealed, the tariff system under the Concession Agreement "had become impractical and impossible for service users." Mata Expert Report at paragraph 220.
308.
Claimants state that, had the Currency Clause been conditioned on the prevalence of the Convertibility Law, the Concession Clause could have clearly said so, and that it would have been futile to resort to calculation and recalculation in U.S. dollar terms since, under the fixed parity of the Convertibility Law, a peso-denominated tariff would have accomplished exactly the same result. See Claimants‘ Reply at paragraphs 134-5. Claimants posit that the primary purpose and effect of the Currency and Cost-Adjustment Clauses are to protect the actual value of the tariffs from the likelihood of devaluation or depreciation of the local currency, and that any other interpretation would be contrary to common sense and deprive such clauses of all meaning. See Claimants‘ Reply, at paragraph 137.
309.
According to Claimants‘ expert on Argentine law, Dr. Alberto B. Bianchi, Claimants‘ interpretation of the Concession Agreement is correct because:

There is no reason preventing the continued validity of the right granted to the concessionaire once the Convertibility Law was extinguished[,]... this right would acquire economic meaning if the peso was rated below the dollar, for example, 2 AR$ = 1 US$. Similarly, and from the hermeneutics point of view, it is more reasonable to maintain that the contract has no lacunae, and therefore the repeal of the Convertibility Law shall not produce the loss of the clause, but its substitution with another, in this case the substitution of the parity fixed by the Convertibility Law with another parity or different exchange rate. See Bianchi Supplemental Expert Report at paragraph 30.

310.
Furthermore, Claimants argue that Respondent distorts Mr. Bastos‘s statement for what Mr. Bastos meant to convey in paragraphs 196-7 of his expert report was that the Regulatory Framework was designed to withstand situations precisely like that of the Argentine Economic Turmoil, thereby dispensing with any need to freeze and pesify tariffs. See Claimants‘ Memorial at paragraphs 111-2. Rather, in Claimants‘ view the Currency Clause naturally refers to the Convertibility Law because the exchange rate at the time of contract was established by that Law, and pursuant to the principle of plénitude du droit,19 the only rational interpretation of the Currency Clause would mean that, in the event the Convertibility Law is repealed, the conversion from dollars to pesos to be done for purposes of billing would have to resort to a new official exchange rate if existent or at the then-current market rate. See Claimants‘ Reply, at paragraphs 114-5.
311.
Claimants add that, had the Province‘s understanding of the Currency Clause been that such would inherently lose effectiveness upon the repeal of the Convertibility Law, it would have been unnecessary for the Emergency Tariff Measures to separately repeal the Currency and Cost-Adjustment Clauses. See Claimants‘ Reply, at paragraph 116. What is more, Respondent overlooks the phrase of the Currency Clause that reads, "at the time of its application to the billing of users," a phrase Claimants consider to be critical given that it demonstrates the Currency Clause contemplated U.S. dollar calculation of tariffs under a floating exchange regime as well. See Claimants‘ Reply, at paragraph 121.
312.
As concerns the Plan Directeur, Claimants request that the Tribunal apply Claimants‘ translation for reason that Respondent‘s version contains critical mistakes that radically alter the sense of the relevant paragraph. See Claimants‘ Reply, at footnote 63. According to Claimants, Respondent‘s use of the word "modification" in lieu of "appreciation" is incorrect and deceptive because it can be interpreted as a downward shift in the real exchange rate when the key point here is that EDF was concerned only about an upward shift. With respect to the other two alleged errors, Claimants assert that they predispose the reader as to the content of the phrase following them, thereby coloring the reader‘s perception of such content.
313.
Moreover, Claimants press that the paragraph in question refers to "real exchange rates," and that this concept is distinct from nominal exchange rates which form the basis of the Currency Clause‘s protection against currency risk. See Claimants‘ Reply, at paragraphs 122-5. Claimants explain that a sharp devaluation followed by sharp inflation (i.e., "tequila effect") exposes the concessionaire to risks resulting from real exchange rates because although the purchasing power of foreign currencies would initially be enhanced due to the devaluation of the local currency, it would eventually diminish on account of inflation of costs. See Claimants‘ Reply, at paragraph 126. As such, Claimants argue that the Plan Directeur expressed concern for losses resulting from real exchange rates, conversely identifying no risk at all resulting from a change in the nominal exchange rates alone. See Claimants‘ Reply, at paragraph 127.
314.
Claimants maintain that, as a matter of law, their conduct does not immunize Respondent from international responsibility under the Argentina-France BIT. See Claimants‘ Reply, at paragraphs 329-34. And that, in any event, Claimants‘ due diligence was sound, performance of EDEMSA matched expectations, and policies on debt financing and capital reductions were all justified and conformed to industry standards. See Claimants‘ Reply, at paragraphs 85-91, 139-88. Rather, EDEMSA‘s higher-than-anticipated levels of debt are a principal result of Respondent‘s actions in violation of the Concession Agreement. See Claimants‘ Reply, at paragraphs 145-7. Moreover, Claimants‘ position is that they did not overbid the purchase price, as can be evinced by the second-place bid which was merely 14.5% less than Claimants‘. See Claimants‘ Reply, at paragraph 104. According to Claimants, the official initial valuation performed by Chase Manhattan Bank and Salomon Smith Barney only serves to express a minimum value, and hence, the fair market value is the price agreed on by a willing seller and a willing buyer, namely Claimants‘ winning bid for US$ 237.7 million. See Claimants‘ Reply, at paragraphs 94100.
315.
Also noteworthy is Claimants‘ contention that, under the Regulatory Framework, the tariff rates necessarily had to enable the concessionaire to cover the cost of capital, or debt. See Claimants‘ Reply, at paragraphs 154-6. Claimants‘ regulatory expert, Mr. Bastos, fully supports this proposition, opining that the use of the term "specific distribution costs" in Article 43(c) of the Provincial Electricity Law is a term of art "widely acknowledged in the electricity sector and in a number of nations around the world" as clearly including as one of its components the cost of capital. Bastos Supplement Expert Report at paragraph 23.
316.
With respect to the Renegotiation Process, Claimants contend that despite their own good faith participation, the Province for its part violated the spirit and letter of its own law when it failed to renegotiate the Concession Agreement and also failed to provide interim tariff adjustments to help EDEMSA survive. Claimants note that the Province proceeded to extend the deadline for completing the Process seemingly ad infinitum, such that even as of 30 April 2009 the relevant Concession Agreements have yet to be renegotiated. See Claimants‘ Reply, at paragraph 227-28.
317.
According to Claimants, the reasons underlying their divestment from EDEMSA are irrelevant to the determination of whether Respondent has violated the Argentina-France BIT, but that to clarify, Claimants proceeded to divest mainly to mitigate losses and to become unburdened of toxic investments such as EDEMSA, which had attained such status due to the Emergency Tariff Measures. See Claimants‘ Reply, at paragraphs 23242. In light of such objective, Claimants decided to consolidate under EDFI‘s ownership a controlling interest in SODEMSA, which would make it easier to sell the SODEMSA shares as well as to obtain an added premium to the sales price. See Claimants‘ Reply, at paragraph 243.
319.
In Respondent‘s view, it was the Province that participated during the Renegotiation Process in good faith and Claimants who lacked it, as corroborated by their proposal for an 87.1% DAV increase amidst the worst economic crisis experienced by Argentina. See Respondent‘ s Counter-Memorial, at paragraphs 457, 468. The Province relaxed stringent quality requirements through Memorandum No. 1 and even agreed to a 3.4% DAV increase that was shot down by the Mendoza Congress. See Respondent‘s CounterMemorial, at paragraphs 461-7.
320.
According to Respondent, Claimants were well aware that a DAV increase would be forthcoming at the conclusion of the UTN Report, which had been completed shortly prior to Claimants‘ sale of their EDEMSA shares to the Mendoza-based company, IADESA. See Respondent‘s Counter-Memorial, at paragraphs 472-6. Consequently, the Letter of Understanding signed on 7 April 2005 between the Province and IADESA stipulated a DAV increase, and Respondent suggests that the precise timing of when Claimants became aware of this directive is unimportant since Claimants could have withdrawn their decision to leave EDEMSA when such information had become available. See Respondent‘s Counter-Memorial, at paragraph 476. Respondent argues Claimants divested from EDEMSA not because of the Emergency Laws, but because of reasons wholly unrelated to this proceeding. See Respondent‘s Counter-Memorial, at paragraph 478.

2. Discrimination, National Treatment and Arbitrary Measures

a) Treaty Framework

321.
Article 4 of the Argentina-France BIT, the so-called National Treatment Clause, provides in pertinent part:

Cada Parte Contratante aplicará, en su territorio y en su zona marítima, a los inversores de la otra Parte, en aquello que concierne a sus inversiones y actividades ligadas a estas inversiones, un tratamiento no menos favorable que el acordado a sus propios inversores....

In its French version, the National Treatment Clause provides:

Chaque Partie contractante applique, sur son territoire et dans sa zone maritime, aux investisseurs de l‘autre Partie, en ce qui concerne leurs investissements et activités liées à ces investissements, un traitement non moins favorable que celui accordé à ses investisseurs....

In English the provision reads:

Within its territory and in its maritime zone, each Contracting Party shall provide to the investors of the other Party, with respect to their investments and activities associated with such investments, a treatment no less favorable than that accorded to its own investors...."

322.
In addition, Claimants invoke the MFN clause to direct the Tribunal to Article 3(2) of the Argentina-Luxembourg BIT which states:

Without prejudice to measures necessary to maintain public order, investments shall enjoy permanent protection and security, to the exclusion of any unjustified or discriminatory measure that could impede in fact or in law its management, maintenance, use, enjoyment or liquidation.

323.
In addition, pursuant to the MFN clause Claimants invoke the bilateral investment treaties Argentina has entered into respectively with Israel, Mexico, and The Netherlands. See Claimants‘ Memorial at paragraph 445-7.
324.
Article 2(2) of the Argentina-Israel BIT provides:

No Contracting Party may hinder, in any manner, through unreasonable or discriminatory measures, the right of the investors from the other Contracting Party to manage, maintain, use, profit from or dispose of their investments in its territory.

Article 3(1) of the Argentina-Mexico BIT states:

Each Contracting Party... shall not impair [the investors‘] management, operation, use, enjoyment or disposal through arbitrary or discriminatory measures.

Article 3(1) of the Argentina-Netherlands BIT reads:

Each Contracting Party.. shall not hinder [the investors‘] operation, management, maintenance, use, enjoyment or disposal by means of unjustified or discriminatory actions.

b) Parties' Contentions

325.
Claimants argue that Respondent is prohibited from enacting measures which are unreasonable, unjustified, arbitrary, and or are discriminatory so as to impede in fact or in law the management, maintenance, use, enjoyment or liquidation of their protected foreign investment. See Claimants‘ Memorial at paragraph 444.
326.
Respondent avers that they have engaged in no discriminatory treatment against Claimants, and that Claimants‘ arguments do not fit within the international law concept of discrimination or arbitrariness, and do not constitute measures contrary to the national treatment guarantee. See Respondent‘s Counter-Memorial at paragraph 559-60.
327.
In addition, Respondent argues the Argentina-France BIT does not contain a provision on discrimination. A previous case, ELSI, set out criterion for a finding of discriminatory treatment, which include intentional treatment, action in favor of a national against a foreign investor, and action that is not taken in similar circumstances against a national.20 See Respondent‘s Rejoinder on the Merits at paragraph 462.If Claimants wish to allege a more comprehensive rule on discrimination than the concept than in the ELSI case they have to prove that such a rule has evolved in international law, which they have not done. See Respondent‘s Rejoinder on the Merits at paragraph 474.
328.
Claimants‘ contest that due to the MFN clause in Article 4 of the Argentina-France BIT, French investors subject to the treaty protection are entitled to receive treatment from Argentina that is at least equal to that which it confers on its own nationals or is no worse than that accorded to third-party nationals, such as Luxembourg, Israel, Mexico, or the Netherlands. See Claimants‘ Memorial at paragraph 443-8.
329.
In this connection, Claimants seek to incorporate those protections accorded in inter alia the Argentina-Luxembourg BIT, which states that, "[I]nvestments shall enjoy permanent protection and security, to the exclusion of any unjustified or discriminatory measure that could impede in fact or in law its management maintenance, use, enjoyment or liquidation."
330.
Respondent argues that Claimants‘ situation is unique and not comparable to the businesses of other sectors with which they are comparing themselves because of Claimants‘ position in the market and the nature of the services they supply. See Respondent‘s Counter-Memorial at paragraphs 584-6. Respondent specifically contends that discrimination can only be alleged in cases of different treatment of two people in equal circumstances, in this case the same business and economic sector. See Respondent‘s Counter-Memorial at paragraphs 566-7.
331.
Claimants assert that, in the present case, Respondent adopted measures that altered the tariff scheme, suspended the legal framework within which EDEMSA was operating and abrogated EDEMSA‘s contractual rights under the Concession Agreement. Claimants also argue that such measures in effect were discriminatory in that they created a de facto cross subsidy by EDEMSA for all of its consumers, especially those in the industrial and exporting sectors, which, while not particularly affected by the Argentine crisis, financially benefited from the devaluation; what is more, such consumers were allowed to increase the price of their own products or services to keep pace with the ensuing inflation. See Claimants‘ Memorial at paragraph 449.
332.
In defense, Respondent asserts that the measures they adopted are not discriminatory because the National Emergency Law was effective for inhabitants and investors of the Argentine Republic while the renegotiation of all public utilities agreements was determined. In fact, the impact upon Claimants‘ investments was no greater than the impact on the rest of the distribution companies and the rest of the economy, and EDEMSA‘s value actually increased after the measures were adopted. See Respondent‘s Counter-Memorial at paragraph 579, 597. In addition, Respondent argues that Claimants fail to identify how this alleged cross subsidy was granted, to whom, for how much, and when, and fail to show how such an assertion would breach the BIT. See Respondent‘s Counter-Memorial at paragraph 588.
333.
Claimants contend that no defensible or legitimate justification can be adduced by Respondent for the Emergency Measures that targeted the public utilities. Instead such measures were adopted for no apparent purpose other than to discriminate by shifting the political blame and economic burden of the crisis onto a discrete and individualized sector that is almost entirely owned or controlled by foreign investors. See Claimants‘ Memorial at paragraph 449.
334.
Respondent argues that there cannot be discrimination because foreign investors were not injured by measures, which were designed to combat the worst crisis suffered in Respondent‘s history, to the benefit of local investors. In addition, Respondent claims that all distribution companies, both national and foreign, were affected by the crisis and renegotiation process with no distinction made an account of nationality, and that public utility tariffs have always been afforded legal treatment different from other nonregulated prices of the economy. See Respondent‘s Counter-Memorial at paragraphs 577, 581-2, 587, 593.
335.
Claimants aver that in light of the fact that the Emergency Measures were unnecessary to begin with and also that such measures had no objectives other than being discriminatory, Claimants have suffered from arbitrary, unjustified, unreasonable and discriminatory treatment, thereby warranting compensation under the BIT. See Claimants‘ Memorial, at paragraph 451.
336.
Respondent contends that the measures were adopted in good faith, were nondiscriminatory, and were effective for the country in general and the Claimants‘ investments in particular. Furthermore, the measures were not arbitrary since they were both reasonable and proportionate, and therefore do not fit the legal definition of arbitrariness as being contrary to reason, rules, or law. See Respondent‘s CounterMemorial at paragraphs 593, 600-9.
337.
Claimants also assert that the discriminatory intent of Respondent is further evidenced by the statements of legislators during the national congressional debates on the draft emergency legislation as well as those of executive branch officials, along with the fact that the provincial government failed to make any meaningful progress in over three years in providing relief to EDEMSA through tariff increases or through a bona fide renegotiation of the Concession Agreement. But as soon as Claimants sold their interests to a local Mendoza company in March 2005, the Province began to move in earnest toward the approval of 38.05% increase in tariffs. See Claimants‘ Memorial at paragraph 450. According to Arriazu‘s expert report, "Since foreign investments in public utilities were much higher than those found in other sectors of the economy, the devaluation of the peso and the freeze and pesification of public utility tariffs affected foreign investors asymmetrically in relation to national investors." See Claimants‘ Memorial at paragraph 245.
338.
Respondent‘s argue that the statements by the legislators were not sufficient to conclude that there is a discriminatory intent or effect towards foreign investors, and that a thorough analysis indicates a clear intention by the Argentine National Congress to take measures to overcome the worst crisis in the history of the country; in addition the renegotiation process took place simultaneously between the eleven provincial distribution companies, all with the same procedure at the same time. In addition, Respondent asserts that Claimant‘s argument that the tariff increase was subject to EDEMSA‘s withdrawal is baseless since they knew there would be an increase and still decided to leave. See Respondent‘s Rejoinder on the Merits at paragraphs 468-70, 472.

3. Fair and Equitable Treatment

a) Treaty Framework

339.
Article 3 of the Argentina-France BIT provides:

Cada una de las Partes Contratantes se compromete a otorgar, en su territorio y en su zona marítima, un tratamiento justo y equitativo conforme a los principios de Derecho Internacional, a las inversiones efectuadas por los inversores de la otra Parte y a hacerlo de manera tal que el ejercicio del derecho así reconocido no sea de hecho ni de derecho obstaculizado.

In the French version, Article 3 states:

Chacune des Parties contractantes s‘engage à assurer, sur son territoire et dans sa zone maritime, un traitement juste et équitable, conformément aux principes du droit international, aux investissements effectués par des investisseurs de l‘autre Partie et à faire en sorte que l‘exercice du droit ainsi reconnu ne soit entravé ni en droit, ni en fait.

In English, the provision reads:

Each of the Contracting Parties undertakes within its territory and its maritime zone to grant Fair and Equitable Treatment according to the principles of International Law to the investments made by the investors of the other Party, and to do so in such a way that the exercise of the right thus granted is not impaired de facto or de jure.

b) Interpretation of Article 3 of the Argentina-France BIT Based on Principles of International Law

340.
The Parties disagree on the contours of the treaty‘s standard of protection and the applicable principles of international law.
341.
According to Claimants, the Fair and Equitable Treatment clause under Article 3 not only obligated Respondent to accord Claimants‘ investment "Fair and Equitable Treatment in accordance with the principles of international law," but also required observance of this commitment in principle as well as in a practical sense. See Claimants‘ Memorial at paragraph 388.
342.
First, Claimants state that it is unclear whether qualifying the obligation of Fair and Equitable Treatment to conform to "principles of international law" results in any changes to the standard. They conclude, however, that even if so, ultimately the outcome remains unaffected because any variation in the standard is compensated for by virtue of Article 4 of the Argentina-France BIT, that is, the MFN Clause. See Claimants‘ Memorial at footnote 194. In particular, Claimants cite to several third-nation BITs that contain an unqualified fair and equitable treatment clause, including Article 3 of the Argentina-Luxembourg BIT, Article 3(1) of the Argentina-Mexico BIT, Article 3(1) of the Argentina-Netherlands BIT and Article 3(2) of the Argentina-New Zealand BIT.
343.
In Respondent‘s view, reference to principles of international law pursuant to Article 3 of the Argentina-France BIT entails a minimum standard of objective treatment. According to Respondent, such reference to customary international law implicates that the concept of Fair and Equitable Treatment does not establish an autonomous and independent standard but rather coincides with the minimum standard. Respondent asserts that such standard of minimum treatment has been endorsed by several nations, including the United States of America, Canada, Switzerland, Mexico and Ecuador, as well by several international tribunals.21
344.
Respondent advances the standard set forth in the 1927 case of Neer v. Mexico22. Respondent argues that this approach, also known as the " Neer standard", does not impose obligations to keep the investment unharmed.
345.
In this connection, Respondent argues that this minimum standard approach sets a high benchmark to prove a violation of the Fair and Equitable Treatment. In support of this view, Respondent cites to several ICSID and NAFTA awards as well as an ICSID annulment decision23, in which the committee required a "clear showing" of treaty violation.
346.
As to incorporation through the MFN Clause, Respondent asserts that Claimants cannot invoke their indirect shareholdings in EDEMSA in order to claim substantive protection under the treaties with respect to a contractual relationship to which they are not privy. Respondent‘s Counter-Memorial at paragraph 330.
347.
In response, Claimants contend that the treaty‘s text under Article 3 ("Fair and Equitable Treatment according to principles of international law") is not synonymous with the minimum standard of treatment recognized in customary international law. See Claimants‘ Memorial at paragraph 399. Claimants argue that the Argentina-France BIT does not contain any reference to the minimum standard of treatment under customary international law, and thus that comporting to Respondent‘s interpretation would contravene principles of treaty interpretation under Article 31(1) of the Vienna Convention as well as the contracting parties‘ intent. See Claimants‘ Reply, at paragraph 275.
348.
Claimants argue that the Neer standard has been traditionally interpreted to afford foreign investors a level of protection that is relatively lower than that offered by the standard of Fair and Equitable Treatment, but that in any event, the Neer standard itself has evolved since its inception in the 1920s. See Claimants‘ Memorial at paragraphs 399-400.
349.
Claimants‘ expert opines that whereas "[b]efore 1927 the emphasis on the economic dimension of sovereignty of each state was accompanied by an indifference toward the role of foreign investment in the international economic arena, [ ] a current perspective will focus much more on global economic interdependence, on the necessity of economic growth and its significance for the reduction of poverty, on the role of foreign investment, and on the accompanying competition among states in attracting foreign investors." See Dolzer Expert Report at paragraph 110.
350.
According to Claimants, Respondent‘s reliance on NAFTA jurisprudence and analysis is without merit in that the treaty language used for NAFTA is different from that of the Argentina-France BIT. Claimants argue that the very title of the Fair and Equitable Treatment provision under NAFTA Article 1105(1) is "Minimum Standard of Treatment" whereas neither the France nor Luxembourg BITs contain language akin to that of NAFTA. Claimants cite to the NAFTA Free Trade Commission‘s binding Note of Interpretation of 31 July 2001, which according to Claimants essentially instructed the tribunals to take such a restrictive approach. Claimants thus conclude that Respondent cannot apply the NAFTA strictures to the broader Fair and Equitable Treatment provisions of modern BITs. Claimants Reply, at paragraph 281-82.
351.
Claimants state that the evolution of the Neer standard has prompted debate with respect to the standard‘s relationship with the obligation of Fair and Equitable Treatment, but contend that the two standards remain separate. See Claimants‘ Memorial at paragraph 401. In support, Claimants cite to an ICSID award in which an arbitral tribunal also dealt with inter alia Article 3 of the Argentina-France BIT.24 See Claimants Post-Hearing Brief on Merits, at paragraph 76. Claimants stress the fact that the tribunal rejected Respondent‘s minimalist approach, finding that the provision‘s reference to principles of international law invites consideration of a wider range of international law principles rather than the minimum standard alone. According to Claimants several other international tribunals have held similarly.25 Alternatively, Claimants argue that Respondent‘s acts were arbitrary and unjust to such a degree that they amount to breaches of the Neer standard anyhow. See Claimants‘ Memorial at paragraphs 439-40.
352.
Second, Claimants contend that the scope of the FET Clause, as drafted, is broader and goes beyond that provided for in most other bilateral investment treaties. See Claimants‘ Memorial at paragraph 398. According to Claimants, the language of the FET Clause stating that "the exercise of the right thus granted is not impaired either de facto or de jure," brings within the scope of the provision any act that has the de facto effect of impairing the right to Fair and Equitable Treatment even if an intent to achieve such an effect is not manifested by the host state. See Claimants‘ Memorial at paragraph 418.

c) Contours of the Legal Standard

353.
Claimants contend that modern jurists accord the standard of Fair and Equitable Treatment a sui generis significance. See Claimants‘ Memorial at paragraph 391. Claimants cite to a number of arbitration awards that have dealt with the subject and conclude that Fair and Equitable Treatment (i) requires the host state to refrain from affecting the basic expectations that were taken into account by the foreign investor in making the investment,26 that is, evisceration of the arrangements in reliance upon which the foreign investor was induced to invest;27 (ii) depends on the factual context of the host state‘s actions, including factors such as the undertakings made to the investor and the actions the investor took in reliance on those undertakings,28 and thus prohibits conduct that might be permissible in some circumstances but appears unfair and inequitable in the context of a particular dispute; and (iii) precludes consideration of whether the host state has proceeded in good faith.29 See Claimants‘ Memorial at paragraph 391.
354.
Claimants add that a trend in international arbitration may be gleaned from recent arbitration awards, which is that the legitimate expectations of the foreign investor is understood to be a key element in assessing whether there has been a breach of the Fair and Equitable Treatment obligation.30 See Claimants‘ Memorial at paragraph 397.
355.
According to Claimants, the expectations upon which investors can reasonably rely in making their investment include assurances and representations with respect to the Concession Agreement and relevant regulatory laws, as well as to the stability and predictability of the Regulatory Framework. In support, Claimants‘ expert, Professor Dolzer, opines that respecting the assurances and representations made as inducement to investors is central to the concept of legitimate expectations. See Claimants Post-Hearing Brief on Merits, at paragraph 84 (citing to Hearing Transcript of 6 November 2009, at 2680:9 to 2682:9). In Claimants‘ view, prior UNCITRAL awards also support such position.31
356.
In addition, Claimants argue that the Fair and Equitable Treatment standard is commonly understood to entail protection as to the stability and predictability of the legal framework32, as well as the obligation not to adopt arbitrary, unreasonable or discriminatory measures.33 See Claimants Post-Hearing Brief on Merits, at paragraphs 87, 89.
357.
Professor Dolzer opines that the standard seeks to ensure the continuity and stability of the legal framework embodied in an investment contract, especially contracts for longterm projects wherein the foreign investor will sink high volumes of resources into the project at an early stage and the calculated economic return will materialize only in the subsequent years and decades, thereby depending on the host country‘s will to honor its contractual commitment and treat the investor in a fair manner. See Dolzer Expert Report at paragraph 91.
358.
Respondent agrees that assessment of Fair and Equitable Treatment requires consideration of the factual context, especially the extraordinary economic and social crisis existing at the time of occurrence conduct. See Respondent‘s Counter-Memorial, at paragraph 331. Respondent cites to inter alia the Saluka award wherein the tribunal stressed that the investors expectations "must rise to the level of legitimacy and reasonableness in the light of the circumstances."34
359.
Respondent, however, argues that customary international law recognizes neither legitimate expectations nor legal stability as essential elements to the Fair and Equitable Treatment standard. See Respondent‘s Rejoinder, at paragraphs 249-50, 255. Respondent asserts that such broad interpretation extending to the protection of legitimate expectation constitutes a legislative expansion inconsistent with the contracting parties‘ intentions as well as the principles of treaty interpretation under Articles 31 and 32 of the Vienna Convention. In support of their restrictive approach, Respondent cites to, inter alia, the Continental Casualty Co. v. Argentina award35 as well as ICSID annulment decisions.36 Moreover, Respondent argues against Claimants‘ interpretation of CMS Gas, Enron and Sempra by suggesting that those awards are distinguishable in that those tribunals included an obligation to maintain a stable and predictable framework because the preamble of the Argentina-U.S. BIT made express reference to the concept of stability.
360.
In Respondent‘s view, legitimate expectations do not demand that the host state refrain from modifying its legislation unless there has been an assumption of specific commitment to the investor. See Respondent‘s Counter-Memorial of 9 February 2009, at paragraph 320. Respondent emphasizes that modifications implemented to the Regulatory Framework in situations otherwise do not violate the standard of Fair and Equitable Treatment.
361.
In this connection, Respondent reiterates its position that the Government of Argentina undertook no specific commitments. See Respondent‘s Counter-Memorial of 9 February 2009, at paragraph 321. Respondent thus argues that there can be no legitimate expectation that Respondent will refrain from implementing changes to the legal framework set forth at the time of the Concession Agreement‘s execution.
362.
Respondent further argues that the standard for Fair and Equitable Treatment additionally requires a showing of denial of justice or discrimination. In support of this view, Respondent cites to several ICSID and NAFTA awards.37 See Respondent‘s CounterMem, at paragraphs 310-11; Respondent‘s Rejoinder, at paragraphs 244. Respondent also seeks support of such view from the Tribunal‘s Decision on Jurisdiction, citing specifically to paragraph 146 therein.
363.
Alternatively, Respondent asserts that, even if a different standard than that of Neer were to apply, there was no violation of Claimants‘ right to Fair and Equitable Treatment. In this connection, Respondent cites to an ICSID award, seeking support of its view that legitimate expectations must be reasonable in light of the circumstances.38

d) Application to the Facts

364.
Claimants contend that Respondent has violated its treaty obligation to accord "Fair and Equitable Treatment according to principles of international law" by thwarting Claimants‘ fundamental investment expectations. Specifically, they claim that (i) the Pre-Emergency Measures affecting the Concession systematically contravened contractual rights that Claimants relied upon when investing; (ii) the Emergency Laws (which, according to Claimants, were unrelated or disproportionate to state objectives, discriminatory, and unconstitutional under Argentine law) destroyed the legal regime created to attract Claimants‘ investment; and (iii) the Renegotiation Process was discriminatory and conducted in bad faith.
365.
Claimants argue that from the very outset of their investment in August 1998, EPRE through arbitrary regulatory measures chipped away at the legal framework guaranteed to EDEMSA‘s investors, until 2002, when the Government of Mendoza is alleged to have completely unraveled that framework through the enactment of the Provincial Emergency Law, thereby radically transforming the "rules of the game" and crippling EDEMSA financially. Claimants add that Respondent‘s acts are rendered all the more unjust by the fact that the Provincial Emergency Law explicitly obligated EDEMSA to continue complying fully with the Concession Agreement, thus further exacerbating EDEMSA‘s financial plight and creating a markedly unfair asymmetry in the contractual relationship. See Claimants‘ Memorial at paragraph 410.
366.
Furthermore, Claimants stress the importance of the additional requirement under Article 3, which imposes the obligation not to impair Claimants‘ right to Fair and Equitable Treatment either de facto or de jure. As such, Claimants contend that, whatever the intent of the Government of Mendoza may have been with respect to the Pre-Emergency Measures affecting the Concession and the enactment of the Emergency Measures, as a practical matter a marked injustice was perpetrated insofar as Claimants‘ use of and benefit from their investment was radically impeded. See Claimants‘ Memorial at paragraph 418.

(1) Expectation Based on Respondent's Conducts

367.
Claimants contend that the Province of Mendoza embarked on a campaign to specifically attract foreign investors in purchasing 51% of EDEMSA Class "A" shares. According to Claimants, Respondent‘s road shows and Info Memo promoted inter alia a foreign investor-friendly legal regime that provided investors with reasonable returns as well as a series of protections tailored to make the investment more appealing to foreign capital markets. See Claimants‘ Memorial at paragraph 403-406.
368.
Key features of the Respondent‘s sales pitch are said to have been (i) the creation of a regulatory agency with independent oversight to insulate investors from politically motivated measures and actions; (ii) the Currency Clause; (iii) the Cost Adjustment Clause; (iv) the Extraordinary Tariff Adjustment Clause; (v) an initial tariff schedule with a fixed-term of five years; and (vi) a concession with a duration of thirty years. See Claimants‘ Memorial at paragraphs 406-407.
369.
According to Claimants, foreign investors were lured with specific guarantees and commitments that created strong expectations of a long-term investment subject to only de minimis political or regulatory risk. See Claimants‘ Memorial at paragraph 408. Claimants contend they in fact did rely on such guarantees and commitments to effectuate their purchase of EDEMSA shares. See Claimants‘ Memorial at paragraph 409. Claimants emphasize the fact that Respondent‘s representations and assurances were directly related to the rights and protections under the Concession Agreement and the Regulatory Framework.
370.
In defense, Respondent asserts that in all circumstances the national and provincial authorities acted in a reasonable, responsible, non-discriminatory and proportionate manner in light of their public responsibility under extraordinary economic conditions. Moreover, Respondent contends that even if it had failed to comply with its contractual obligations, such breaches do not amount to violations of Fair and Equitable Treatment. In support of such view, Respondent cites to Waste Mgmt. Inc. v. Mexico, ICSID Case No. ARB(AF)/00/03 (Award of 30 April 2004).
371.
In Respondent‘s view, a scenario in which the Concession Agreement would go unmodified despite economic and social crisis was beyond Claimants‘ reasonable expectation. Moreover, it was beyond expectation that no renegotiation would take place to account for the new macroeconomic and social situation of the country. See Respondent‘s Post-Hearing Brief on Merits, at paragraph 68. According to Respondent, such expectation of Claimants runs afoul of what should be fair and equitable in the context of a general and dramatic crisis in which everyone loses. See Respondent‘s Counter-Memorial, at paragraph 290.
372.
Moreover, Respondent argues that assurances made by the Argentine officials prior to Claimants‘ investment could not give rise to legitimate expectations because the privatization materials provided therewith were not contractually binding. See Respondent‘s Post-Hearing Brief on the Merits, at paragraphs 70-73. Said materials did not establish Claimants‘ legitimate expectation given the bidders‘ responsibility to conduct due diligence and base their bids on their own assessment and investigation.
373.
According to Respondent, the Regulatory Framework and Concession Agreement were expressly subject to the existing circumstances at the time of investment and Claimants‘ efficient operation of the concession. As such, the Regulatory Framework and Concession Agreement were not intended to compensate Claimants for consequences pertaining to their business risk. See Respondent‘s Counter-Memorial, at paragraph 291.
374.
Respondent further argues that Claimants were at their own fault in their investment failing to meet their expectations. Respondent asserts that such failure was caused by Claimants‘ inadequate due diligence despite Respondent supplying sufficient information per the Data Room, as well as by Claimants‘ own breaches, technical inefficiencies and bad management. According to Respondent, Claimants had voluntarily invested in Mendoza after making their own assessment and becoming fully aware that they would assume the risks inherent in a regulated sector. See Respondent‘s Counter-Memorial, at paragraph 292.
375.
Claimants respond by asserting that Respondent‘s due diligence arguments cannot alter its liability under the BIT, which should necessarily be based on the state‘s postinvestment conduct, not Claimants‘ pre-investment conduct. Alternatively, Claimants argue that such arguments by Respondent are baseless because Claimants did carry out adequate due diligence and inspections as well as properly manage the company.
376.
In Claimants‘ view, the fact that bidders were supposed to conduct due diligence does not render their reliance on the State‘s assurances and representatives irrational or illegitimate, or provide carte blanche to Argentina to renege on those assurances. See Claimants‘ Post-Hearing Reply on the Merits, at paragraph 16.

(2) Pre-Emergency Measures Affecting the Concession

377.
As an initial matter, Respondent asserts, without admitting wrongdoing, a claim based on denial of justice should be dismissed in limine insofar as it is based on the PreEmergency Measures affecting the Concession because it was not pled in Claimants‘ Memorial, and thus, must be deemed untimely. See Respondent‘s Rejoinder at paragraph 768.
378.
Claimants contend that the Pre-Emergency Measures affecting the concession unilaterally and systematically contravened aspects of the Concession Agreement alleged to have been fundamental in the Claimants‘ evaluation of investing in the Province of Mendoza. See Claimants‘ Memorial at paragraph 423.
379.
Claimants argue that the Pre-Emergency Measures affecting the Concession blatantly disregarded material financial and contractual commitments, such as to compensate EDEMSA for losses incurred as a result of provincial subsidies and for financial obligations assigned to EDEMSA as part of the contractual arrangement, as well as to abide by the tariff schedules and tariff revision mechanisms established in the Concession Agreement. See Claimants‘ Memorial at paragraph 423. In Claimants‘ view, EPRE summarily ignored such commitments by inter alia establishing new categories of tariffs and users and arbitrarily expanding the geographical scope of the concession area.
380.
Claimants contend that these measures went beyond mere contractual breaches in that they were adopted by the Province of Mendoza in exercise of its regulatory powers. According to Claimants, such acts configure a pattern of conduct that is clearly not fair or equitable, as it substantially altered the economic equilibrium of the Concession Agreement that the Claimants had relied upon, thereby significantly reducing the value of their investment. See Claimants‘ Memorial at paragraph 424.
381.
Claimants argue that EDEMSA faced difficulties in the administrative and judicial proceedings, which were sought to vindicate rights under the Concession Agreement. See Claimants‘ Memorial at 148-89. Claimants thus assert that Respondent frustrated Claimants‘ access to fair legal proceedings, thereby breaching one of the core principles inherent in the standard of Fair and Equitable Treatment.
382.
Claimants‘ witness, Mr. Gonella, provides further detail regarding the barriers that EDEMSA confronted in the administrative proceedings. See Claimants‘ Reply, at paragraphs 335-37. According to Mr. Gonella, EDEMSA was required to submit any administrative claim in the first instance to EPRE, which in fact was the same independent government entity that had issued the administrative resolutions detrimental to EDEMSA by way of unilaterally changing the terms of the Concession Agreement. See Supplementary Witness Statement of Hector Gonella, at paragraph 79. Mr. Gonella further provides that EPRE‘s dual role as judge and party prevented any justice before the administrative tribunal. Mr. Gonella opines that the general trend in the way in which EDEMSA‘s claims were being dealt with followed a pattern involving lengthy proceedings with long periods of time spent waiting for decisions to be adopted and notified; followed by, "incorrectly based decisions without a direct reply to EDEMSA‘s arguments in defense of EDEMSA‘s rights, and the repeated denial of each claims being submitted."
383.
Mr. Gonella further comments on the administrative appeal process before the ME&PW that followed after the initial proceedings mentioned above. See id. at paragraphs 80. According to Mr. Gonella, the officials in charge of resolving EDEMSA‘s appeal had a contractual relationship with the predecessor company, EMSE, and displayed hostility against EDEMSA. Each and every claim submitted before the ME&PW was rejected.
384.
As to the final stage of appeal, which was made before the judicial courts, Claimants assert that EDEMSA suffered significant denials of due process, including an inability to have its claims heard on the merits as well as an inability to obtain relief. Claimants‘ Reply at paragraph 337. Claimants cite to Mr. Gonella‘s statement, in which he provides that the Supreme Court of Mendoza, having original and exclusive jurisdiction over EDEMSA‘s claims, rejected all claims made by EDEMSA based on merely formal considerations. Mr. Gonella opines that several delays in the judicial process were made intentionally and that EDEMSA‘s arguments were rejected for political reasons. Moreover, Mr. Gonella states that during the appeal process, the court refused to accept expert reports on damages. Id. at paragraphs 89, 90-91.
385.
With respect to Claimants‘ witnesses, including Mr. Gonella, Respondent seeks to undermine their credibility. See Respondent‘s Post-Hearing Brief on the Merits, at paragraphs 25-32. In this regard, Respondent asserts that Mr. Gonella has a conflict of interest because he has served as counsel to EDF. See Respondent‘s Post-Hearing Brief on the Merits, at paragraphs 25-32. In response, Claimants argue that such argument cuts both ways in that all of Respondent‘s fact witnesses are themselves employees of the Province of Mendoza. Claimants‘ Post-Hearing Reply on the Merits, at paragraph 5.