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

Decision on Annulment

Acronyms and Abbreviations
AC Claimants' Annex; document submitted by the Claimants
Award Award of 11 June 2012 in EDF International SA and Others v. Argentine Republic (ICSID ARB/03/23)
BIT Bilateral investment treaty
Counter-Memorial Claimants' Counter-Memorial on Annulment
Disqualification Decision Decision of 25 June 2008 on the challenge to Professor Kaufmann-Kohler in EDF International SA and Others v. Argentine Republic (ICSID ARB/03/23)
ICSID, or the Centre International Centre for the Settlement of Investment Disputes
ICSID Arbitration Rules International Centre for the Settlement of Investment Disputes Rules of Procedure for Arbitration Proceedings (2006 version)
ICSID Convention Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 1965
Jurisdiction Decision Decision of 5 August 2008 on Jurisdiction in EDF International SA and Others v. Argentine Republic (ICSID ARB/03/23)
Memorial Argentine Republic's Memorial on Annulment
RA Respondent's Annex; document submitted by the Argentine Republic
Rejoinder Argentine Republic's Rejoinder on Annulment
Reply Claimants' Reply on Annulment

I. Introduction

A. Procedural History of the Annulment Proceedings

2.
On 11 October 2012, pursuant to ICSID Arbitration Rule 50(2), ICSID's Secretary-General registered the Application and transmitted a copy of the Notice of Registration to the parties. The parties were also informed that, pursuant to ICSID Arbitration Rule 52(2), the enforcement of the Award was provisionally stayed.
3.
On 2 January 2013, the ad hoc Committee was deemed constituted by Sir Christopher Greenwood (British), President of the Committee; Professor Teresa Cheng (Chinese) and Professor Yasuhei Taniguchi (Japanese).
4.
On 22 February 2013, the First Session was held with the Members of the Committee present at the seat of the Centre in Washington, D.C. and the parties participating via telephone conference. During that session, a procedural calendar for the conduct of the proceedings was agreed upon by the parties.
5.
On 25 February 2013, the Committee issued Procedural Order No. 1 concerning the schedule of the proceedings. On 5 March 2013, the Committee issued Procedural Order No. 2 concerning the schedule of the proceedings for the continuation of the provisional stay of enforcement of the Award which had been granted by the Secretary-General in accordance with Article 54(2) of the Arbitration Rules.
6.
On 18 March 2013, Argentina filed a formal request for the stay of the enforcement of the Award. On 3 April 2013, the Claimants filed observations on Argentina's request. On 17 April 2013, Argentina filed a response and on 29 April 2013, the Claimants filed a reply.
7.
On 28 May 2013, Argentina filed its Memorial on Annulment.
8.
On 18 July 2013, the Committee issued a decision continuing the stay of enforcement of the Award until 30 September 2013, upon which date the stay would be lifted unless Argentina provided by 16 September 2013 an unequivocal undertaking that, in the event the Award is not annulled (or is annulled only in part), it will make payment of the principal and interest awarded (or, in the event of partial annulment, awarded in those parts of the Award which are not annulled) within ninety days of the final decision of the Committee and without any requirement that the Claimants bring proceedings in the courts of Argentina or that those courts or other Argentine national authorities issue an order requiring payment, the stay of enforcement will be lifted with effect from midnight on 30 September 2013 unless the Committee otherwise decides.
9.
In a letter dated 13 September 2013, Argentina declined to give the undertaking requested in the Committee's decision of 18 July 2013. Consequently, on 26 September 2013, the Committee issued a further decision lifting the stay of enforcement of the Award which took effect from midnight (Washington D.C. time) on 30 September 2013.
10.
On 16 September 2013, EDF filed its Counter-Memorial on Annulment. Argentina filed its Reply on Annulment on 6 December 2013 and on 25 February 2014, EDF filed its Rejoinder on Annulment.
11.
From 2 June to 3 June 2014 the Committee held a hearing on annulment at the seat of the Centre in Washington D.C.. Present at the hearing were:

- the ad hoc Committee : Sir Christopher Greenwood, President of the Committee; Professor Teresa Cheng and Professor Yasuhei Taniguchi, Members of the Committee; and Mrs. Anneliese Fleckenstein, Secretary of the Committee;

- for the Argentine Republic : Dr. Javier Pargament, Subprocurador del Tesoro de la Nación ; Dr. Gabriel Bottini; Mrs. María Alejandra Etchegorry and Soledad Romero Caporale, and Mr. Nicolás Duhalde from the Procuración del Tesoro de la Nación; and

- for the Claimants : Mr. Paolo Di Rosa, Ms. Mallory B. Silberman, Mr. Pedro G. Soto, Mr. Kelby Ballena (Legal Assistant) and Ms. Aimee Reilert (Legal Assistant) from Arnold & Porter LLP; and Mr. Jean-Paul Palma and Mrs. Isabelle Praud from EDF.

12.
In a letter dated 29 July 2015, Argentina requested information from Professor Cheng in connection with a disclosure made in the Total case1. Argentina supplemented its letter with a further letter dated 3 August 2015, in which Argentina requested further information from Professor Cheng. By letter dated 6 August 2015, Professor Cheng provided answers to both of Argentina's letters.
13.
On 6 August 2015, Argentina filed a proposal for the disqualification of Professor Cheng in the present proceedings, in accordance with Article 57 of the ICSID Convention and ICSID Arbitration Rule 9 (the "Disqualification Proposal"). On the same day, the Centre informed the parties that the proceeding had been suspended until the Disqualification Proposal was decided, pursuant to ICSID Arbitration Rule 9(6).
14.
Argentina filed its arguments on the Proposal on 19 August 2015; the Claimants replied to the Proposal on 25 August 2015. Professor Cheng furnished explanations on 7 September 2015, as envisaged by ICSID Arbitration Rule 9(3). Argentina submitted additional comments on 14 September 2015. The Claimants did not submit any additional comments.
15.
On 17 September 2015 Argentina wrote to the Secretary of the Committee requesting information from the members of the Committee regarding any past or present links with any of the parties or their counsel currently engaged in litigation with Argentina. Sir Christopher Greenwood and Prof. Yasuhei Taniguchi provided responses to this request by letters of 22 September and 6 October 2015, and 16 October 2015, respectively.
16.
On 20 November 2015, the Majority issued its Decision on the Proposal to Disqualify Professor Teresa Cheng rejecting Argentina's Disqualification Proposal.
17.
On 22 December 2015, the proceeding was declared closed, pursuant to ICSID Arbitration Rule 38(1).

B. Brief History of the Dispute

18.
The dispute, which is described in detail in paragraphs 50-176 of the Award, has its origins in the restructuring during the late 1990's of the framework for the distribution of electricity in the Argentine Province of Mendoza ("Mendoza"). On 28 May 1997, Mendoza enacted Provincial Law No. 6,497 (the "Provincial Electricity Law") and No. 6,498 (the "Transformation Law") which adopted a new regulatory framework for the provision of electricity supplies in the Province. In accordance with that framework, the state-owned electricity distributor was to be privatised. A new company, Empresa Distribuidora de Energía de Mendoza S.A. ("EDEMSA") was created. Mendoza sought the sale of 51% of the Class "A" shares in EDEMSA and to that end retained Chase Manhattan Bank and Salomon Smith Barney as advisers. In accordance with their remit, Chase Manhattan and Salomon Smith Barney sought to attract foreign investors. They prepared an information memorandum (the "Info Memo") and held a number of "road shows", including an exclusive meeting with Electricité de France ("EDF"), the parent company of EDFI. They emphasised the guarantees to investors under the regulatory framework and the concession which it was envisaged would be granted to EDEMSA. That framework provided for tariffs to be fixed in such a way as to ensure an investor was able to recoup expenditure and obtain a reasonable rate of return on the investment. Tariffs were to be fixed for a five year period but with provision for both an ordinary tariff review and an extraordinary tariff review. At the time, the Convertibility Law of Argentina provided that the Argentine peso was convertible at the rate of one peso to one US dollar. It was envisaged that the concession would contain provisions guaranteeing that the costs and reasonable rate of return would be determined in US dollars for purposes of assessing the tariff rate and that customers would then be invoiced in pesos at the rate of one peso to one dollar. According to the Tribunal, these safeguards were "key features of the sales pitch" by Chase Manhattan Bank and Salomon Smith Barney.2 Investors wishing to bid for the shares in EDEMSA were required to accept and initial a copy of the proposed concession.
19.
A consortium company, SODEMSA, incorporated in Argentina, was formed by EDFI, SAURI and Crédit Lyonnais together with Argentine co-investors. EDFI acquired a 45% interest in SODEMSA and SAURI a 15% interest. The remaining 40% interest was acquired by MENDINVERT, an Argentine company, in which Crédit Lyonnais held 70% of the shares, the remainder being held by Argentine investors. Crédit Lyonnais subsequently transferred its interest in MENDINVERT to León, a Luxembourg corporation which was wholly owned by Crédit Lyonnais until 2004 when it became a wholly owned subsidiary of EDFI.3 SODEMSA successfully bid for 51% of the Class A shares in EDEMSA and in July 1998 EDEMSA and the Government of Mendoza concluded an agreement ("the Concession Agreement") on the terms envisaged. SODEMSA assumed control of EDEMSA and commenced operations on 1 August 1998.
20.
In late 2001 and early 2002 Argentina experienced an acute economic emergency which saw the appointment and resignation of four presidents in a period of three weeks.4 The scale of the situation facing Argentina was described by the tribunal in the Continental Casualty case which spoke of - a crisis that brought about the sudden and chaotic abandonment of the cardinal tenet of the country's economic life, such as the fixed convertibility rate which had been steadfastly recommended and supported for more than a decade by the IMF and the international community; the near collapse of the domestic economy; the soaring inflation; the leap in unemployment; the social hardships bringing down more than half the population below the poverty line; the immediate threats to the health of young children, the sick and the most vulnerable members of the population; the widespread unrest and disorders; the real risk of insurrection and extreme political disturbances; the abrupt resignations of successive presidents and the collapse of the government, together with a partial breakdown of the political institutions and an extended vacuum of power...5
21.
A National Emergency Law was adopted in January 2002 which abrogated the fixed parity between the peso and the US dollar and allowed the peso to float on the exchange markets. It rapidly dropped to an exchange rate of approximately three pesos to one dollar. The National Emergency Law, which was adopted in slightly modified form by the Province of Mendoza, also abrogated tariff terms in public utility concessions involving foreign currencies, including the relevant clauses in the Concession Agreement. The effect was that EDEMSA was obliged to accept payment calculated on the basis of parity between the peso and the US dollar even though the peso was then worth only approximately one third of a dollar; an effect known as "pesification". In addition, the emergency measures adopted by Argentina and Mendoza precluded utility companies from suspending or changing the performance of their obligations. The emergency measures made provision for renegotiation of contracts. EDEMSA entered into negotiations with the authorities in Mendoza6 but no revision of the tariff was agreed until 7 April 2005, one week after the Claimants had sold their interests in SODEMSA to an Argentine company, IADESA, owned by Argentine investors.
22.
On 16 June 2003, EDFI and SAURI filed a request for arbitration. That request was subsequently amended to add León as a claimant. The Claimants maintained that the effect of (a) a series of measures taken by Mendoza prior to the emergency and (b) the measures taken as a result of the emergency which commenced in late 2001 was to destroy the economic equilibrium of the Concession Agreement. They contended that the equilibrium was not restored until after they had, in an attempt to mitigate their losses, sold their interests to IADESA. Under the terms of that sale, the Claimants retained their rights in respect of the ICSID claim they had instituted.
23.

The Claimants maintained that the pre-emergency interference with their investment and the emergency measures constituted violations of the Argentina-France Agreement for the Promotion and Reciprocal Protection of Investments (the "Argentina-France BIT"), and, to the extent relevant (a matter considered below), the Mutual Investment Promotion and Protection Treaty between Argentina and the Belgium-Luxembourg Economic Union (the "Argentina-Luxembourg BIT"). The Claimants contended that the measures taken both before and during the emergency were arbitrary and discriminatory, that they constituted unfair and inequitable treatment, violated the requirement of full protection and security and amounted to indirect expropriation. In addition, the Claimants maintained that the failure to respect the commitments entered into in the Concession Agreement and by means of the regulatory framework of laws adopted by Argentina and Mendoza contravened the Most Favoured Nation ("MFN") clause in Article 4 of the Argentina-France BIT, because other BITs concluded by Argentina, notably those with Luxembourg and Germany, contained umbrella clauses making failure to comply with specific commitments entered into in connection with an investment a breach of treaty.

24.
Argentina challenged the jurisdiction of the Tribunal on several grounds. For present purposes, the objections which are of particular relevance are that:-

(i) the Claimants no longer owned any relevant investment after the sale of shares to IADESA; and

(ii) the Claimants lacked standing to present claims for injuries allegedly suffered by EDEMSA.

Argentina also denied that the claims were well-founded on the merits, asserting in particular that the emergency measures were necessary and legitimate responses to an acute economic emergency.

C. Summary of the Jurisdiction Decision and Award

1. The Jurisdiction Decision

25.
On 5 August 2008, the Tribunal issued a decision on jurisdiction (the "Jurisdiction Decision") dismissing Argentina's objections to jurisdiction. Although it will be necessary, in the course of this decision, to refer to other points in the Jurisdiction Decision, for present purposes it is sufficient to note two aspects of the Tribunal's findings on jurisdiction.
26.
First, the Tribunal considered that the jurisprudence of the International Court of Justice and arbitral tribunals made clear that "as a general matter, the date when proceedings are instituted serves as the relevant time to establish jurisdiction".7 Accordingly, jurisdiction had to be assessed as at the date in 2003 when proceedings were commenced, irrespective of the subsequent transfers of interest. It therefore proceeded on the basis that SAURI and León should remain parties,8 while leaving open the question whether they continued to possess substantive rights.9 The Tribunal approached León's claims on the basis that they were founded upon the Argentina-Luxembourg BIT.10
27.
Secondly, the Tribunal rejected Argentina's objection that the Claimants lacked standing. That objection was based upon a series of arguments concerning the nature of the Claimants' interests and, in particular, the fact that the Concession Agreement was between Mendoza and EDEMSA, whereas the Claimants held shares in SODEMSA, which in turn held shares in EDEMSA. The Tribunal held that neither Article 25 of the ICSID Convention, nor the relevant provisions of the Argentina-France and Argentina-Luxembourg BITs required that an investment be held directly, so that the fact that the Claimants' interests in EDEMSA were indirect was not an obstacle to jurisdiction.11
28.

Argentina had also argued that, in accordance with the judgments of the International Court of Justice in the Barcelona Traction,12ELSI13 and Diallo14 cases, international law did not recognize any right for the shareholders in a company to maintain a claim in respect of a wrong allegedly done to the company. The Tribunal held that these judgments concerned the right of diplomatic protection by a State and were inapplicable to claims brought by investors in their own name under the terms of a bilateral investment treaty.15 In the present case, the Tribunal held, the terms of both the Argentina-France BIT and the Argentina-Luxembourg BIT were broad enough to cover indirect investments. It also stated that:

174. Finally, this Tribunal cannot ignore the common-sense meaning given to "investment". Holding shares in a company normally means ownership of an investment in the underlying economic activity conducted by that entity, directly or indirectly. Every day people speak of oil, mining or timber investments, even though ownership resides in shares rather than rigs, gold deposits or forests. Stock in a bank might be said to implicate an investment in the financial services industry, when in fact the ownership relates to corporate securities of a distinct legal person, which in turn owns a loan portfolio and the bricks and mortar of a vault or building. To use language in any other way would create an artificial formalism unworthy of a living legal system.

175. In short, for treaty-based investment arbitration, the concept of investment must be understood to include the underlying business represented by the shares of the investment vehicle. Otherwise, an expropriation which left an empty corporate shell would never be compensable.

2. The Award

29.
On 11 June 2012, the Tribunal issued its Award. It concluded that Argentina had breached its obligations to respect its specific commitments undertaken in connection with EDF's investment and to afford the Claimants fair and equitable treatment.16 It rejected the Claimants' other claims. The Tribunal awarded damages to the Claimants in the amount of US$ 136,138,430 as of December 2001, with interest compounded annually at the rate for ten year U.S. Treasury Bonds until payment of the Award.17 The Award runs to over three hundred pages; it is unnecessary to summarise all of its reasoning here and the Committee therefore reviews only those parts that are directly relevant to the issues raised in the Application for annulment.

a. Applicable law

30.
León invoked the Argentina-Luxembourg BIT in the Amended Request for Arbitration, and the Tribunal in its Jurisdiction Decision proceeded on the basis that León's claims were governed by that Treaty.18 In the Award, however, the Tribunal noted that

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 1993 ("Argentina-Luxembourg BIT").19

The Tribunal subsequently concluded that the case should be decided exclusively on the basis of the Argentina-France BIT and that it was unnecessary to refer to the Argentina-Luxembourg BIT, save in respect of the argument based on the MFN clause in the Argentina- France BIT.20

31.
Regarding the role of Argentine law in determining Argentina's international liability, the Tribunal concluded that the terms of the Argentine-France BIT provided the foundation and framework for its decision.21 The fact that the Argentine Government was vested with broad authority by Argentine law to deal with the national economic crisis did not change the Tribunal's conclusion. Finally, the Tribunal was not convinced by the evidence that Argentina was not able to comply with its international obligations due to its need to guarantee human rights.22

b. The "umbrella clause" and Argentina's compliance with specific commitments

32.
The Claimants argued that the MFN clause in Article 4 of the Argentina-France BIT enabled them to rely upon "umbrella clauses" in other Argentine BITs and thus to claim in respect of alleged breaches by Argentina of commitments specifically undertaken with regard to the investment, in particular the clauses in the Concession Agreement guaranteeing the rate of return and the calculation of tariffs by reference to the US dollar. Argentina denied that the MFN clause could be used in that way and maintained that, even if the MFN clause was broad enough to permit reliance on the umbrella clauses in other BITs, those clauses did not assist the Claimants as they were not party to the Concession Agreement and that Agreement gave exclusive jurisdiction to the Argentine courts.
33.
The Tribunal held that the MFN clause did permit recourse to umbrella clauses in other BITs.23 While noting the existence of considerable controversy over the use of MFN clauses to obtain recourse to arbitration on terms more favourable than those in the treaty applicable to an investor, it held that no similar controversy existed with regard to the use of MFN clauses to obtain recourse to the substantive protection afforded by other treaties. The Tribunal considered that the terms of Article 4 of the Argentina-France BIT clearly permitted recourse to the umbrella clauses invoked by the Claimants.
34.
The Tribunal also rejected Argentina's arguments regarding the meaning and scope of the umbrella clauses on which the Claimants relied (principally those in the Argentina-Germany and Argentina-Luxembourg BITs). The Tribunal held that

This does not mean that all contractual breaches necessarily rise to the level of treaty violation. However, the serious repudiation of concession obligations implicated by failure to respect the currency clause... must clearly be seen as a violation of "commitments... undertaken with respect to investors" (Article 10(2) Argentina-Luxembourg BIT) and "a commitment undertaken in connection with the investments made by nationals or companies from the other Contracting Party". (Article 7(2) Argentina-Germany BIT).24

35.
The Tribunal considered that the pesification of tariffs combined with the fact that EDEMSA was forbidden to vary or suspend its own performance under the Concession Agreement, and the absence of any increase in tariffs until 2005 undermined the entire basis on which the Province of Mendoza had solicited investment.25 The Tribunal stated that it was unconvinced by Argentina's argument that maintaining the Currency Clause and other provisions of the Concession Agreement would have extinguished the principle of fair and reasonable tariff rates and that the measures taken were in practice of benefit to EDEMSA.26 It held that there was no evidence that the Emergency Measures benefited EDEMSA's economic position; on the contrary, the Tribunal found that these measures affected EDEMSA's profitability, altering the economic equilibrium of the Concession Agreement.27 Additionally, this financial equilibrium was never restored, even after financial indicators showed a stable trend towards recovery.28 The Tribunal therefore concluded that Argentina had "breached its obligations... to respect specific commitments undertaken in connection with Claimants' investment".29

c. Fair and equitable treatment

36.
With regard to the claim that Argentina's actions contravened Article 3 of the Argentina-France BIT (fair and equitable treatment), the Award concluded that Argentina's violation of certain obligations under the umbrella clause, operated " in tandem " with the breach of its duty to afford EDF's investments Fair and Equitable Treatment.30 The Tribunal found that it did not need to decide whether Article 3 established an independent standard of fairness or coincided with the customary international minimum standard. According to the Tribunal, Article 3 required Argentina to respect international law in principle and in practice, and its failure to abide by express commitments without re-establishing the economic equilibrium within a reasonable time, constituted inequitable treatment.31 The Tribunal considered that the application of this provision depended on the factual context of the Host State's actions and, in this regard, it was mindful that the economic crisis was relevant to the interpretation of the fair and equitable treatment standard. The investor's expectations were to be balanced against the Host State's need to take action in a crisis. However, fairness and equity also required that the Host State respect the fundamental representations of a concession once the crisis was over.32 The Tribunal concluded that there had been a breach of Article 3 of the Argentina-France BIT.33

d. Claims in respect of actions taken before the emergency

37.
Subsequently, the Tribunal dealt with EDF's claims that, prior to the enactment of the Emergency Measures, Argentina had breached its obligations by unilaterally modifying the regulatory framework and the Concession Agreement, in a way that had negative effects on EDEMSA, and changing the financial equilibrium of the contract to EDEMSA's detriment.34 The Tribunal found that Argentina was liable only in respect of the claims related to the modification of the Tariff Regime, namely:35 (i) modification of the fee structure for large users; (ii) reduction of contracting periods with users; and (iii) incorporation of an option for users to choose between categories at their discretion (Optional T-2 tariff category).36 It dismissed the other claims regarding actions taken before the emergency.

e. Other claims

38.
The Tribunal dismissed the Claimants' other claims, holding that the measures taken by Argentina were not arbitrary or discriminatory37 and that they did not violate the requirement to provide full protection and security.38 The Tribunal also held that Argentina's actions did not amount to indirect expropriation.39

f. Argentina's defences

39.
During the proceedings on the merits, Argentina asserted several affirmative defences.40 The Award rejected the argument that these defences precluded a finding against Argentina, holding that they were not a bar to the Claimants' recovering compensation.
40.
With regard to Argentina's defence of necessity, the Tribunal held that, since the Award was based exclusively upon the Argentina-France BIT, the necessity defence in Article 3(2) of the Argentina-Luxembourg BIT was inapplicable.41 The Tribunal also concluded that Argentina had failed to establish that the requirements for a defence of necessity under customary international law had been met. The Tribunal maintained that "necessity must be construed strictly and objectively, not as an easy escape hatch for host states wishing to avoid treaty obligations which prove difficult".42 In that connection, the Tribunal considered that Argentina had failed to demonstrate that the measures taken were the only way for it to safeguard its essential interests, that it had not contributed to the state of necessity by its own actions, or that it had returned to the status quo when possible or paid compensation.43
41.
The Tribunal further dismissed Argentina's inadmissibility defence that any claim based on a denial of justice in connection with the Pre-Emergency Measures should be dismissed in limine, because they were not pleaded by EDF in its Memorial on the Merits.44 The Tribunal found that EDF had not made a separate claim of denial of justice, but instead framed its arguments in the context of fair and equitable treatment and full protection and security. Additionally, Argentina's defence regarding EDF's double recovery of damages caused by the Pre-Emergency Measures was dismissed; the Tribunal concluded that EDF had not received any redress for such damages.45

g. Quantum of Damages

42.
The Tribunal assessed damages on a discounted cash flow ("DCF") basis, having noted that the Parties agreed that the alternative methods of valuation considered were not appropriate.46 It awarded damages of US$ 2,502,797.00 in respect of the losses sustained prior to the emergency and of US$ 133,635,633 in respect of the losses caused by the emergency measures. The latter figure was calculated as at 31 December 2001 by taking the value of the Claimants' stake in EDEMSA (44.88% of the total)47 had the emergency measures not been taken (the "but for" scenario) and then deducting the amount which might reasonably have been received in the 2005 sale to IADESA, valued as of 31 December 2001.

II. Grounds for Annulment

43.
Article 52(1) of the ICSID Convention provides that -

Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the following grounds:-

(a) that the Tribunal was not properly constituted;

(b) that the Tribunal has manifestly exceeded its powers;

(c) that there was corruption on the part of a member of the Tribunal;

(d) that there has been a serious departure from a fundamental rule of procedure; or

(e) that the award has failed to state the reasons on which it is based.

44.
In its Application, Argentina seeks annulment on all of the above grounds except for that set out in Article 52(1)(c), i.e. corruption on the part of a member of the Tribunal. Argentina's objections to the Award concern six different issues, in respect of most of which it seeks annulment on more than one of the grounds set out in Article 52(1). The Tribunal has therefore structured its Decision by reference to these six issues, rather than by the Article 52 grounds on which annulment is sought. Argentina's arguments in respect of each issue, and the Claimants' response thereto, are considered in detail in the subsequent sections of this Decision. It is, however, useful to set out a brief overview of the six issues and the grounds invoked in respect of each of them at this stage.

A. Challenges to Two Members of the Tribunal

45.
Argentina maintains that neither Professor Gabrielle Kaufmann-Kohler nor Professor Jesús Remón possessed the requisite qualifications of independence and impartiality demanded by Article 14(1) of the ICSID Convention, with the result that the Award should be annulled because the Tribunal was not properly constituted (Article 52(1)(a)) and there was a serious departure from a fundamental rule of procedure (Article 52(1)(d)).
46.
In the case of Professor Kaufmann-Kohler, Argentina refers to the fact that in 2006 she became a director of the Swiss Bank UBS. When Argentina discovered this fact in November 2007, Argentina proposed, under Article 57 of the Convention, that she should be disqualified because UBS had various interests in, and links to, EDF.48 In accordance with Article 58 of the Convention, the challenge to Professor Kaufmann-Kohler was heard by the two remaining members of the Tribunal, Professor Park and Professor Remón, who issued a decision on 25 June 2008 ("the Disqualification Decision") dismissing the challenge.49 Argentina maintains that when a challenge to an arbitrator is dismissed, it is open to the party which brought that challenge to seek annulment of the award and that an ad hoc Committee may annul the award under either or both of the grounds in Article 52(1)(a) and (d) if it considers that the challenged arbitrator lacked the qualifications required by Article 14(1).
47.
In the case of Professor Remón, the application for annulment arises in a different context both procedurally and substantively. In April 2012 Professor Remón informed the parties that the law firm of which he was a partner acted for the Spanish company Repsol and that if the firm was asked by Repsol to represent it in any proceedings which it might bring against Argentina in connection with the measures taken by Argentina in relation to Repsol's interests in the Argentine company Yaciementos Petrofileros Fiscales ("YPF"), then he would abstain from any involvement in those proceedings until the Award in the present case had been issued.50 Argentina called for his resignation on the ground that this disclosure showed the existence of a professional relationship between the law firm and a company already in dispute with Repsol and that this relationship, together with the fact that Professor Remón had made clear that he was prepared to act for Repsol against Argentina in the future, showed that he lacked the requisite qualities of independence and impartiality.51 Professor Remón declined to resign. Since the proceedings had already been closed at the date of the disclosure, Argentina was unable to propose disqualification under Article 57. The matter is thus raised for the first time in the annulment proceedings.
48.
This aspect of Argentina's case is addressed in Part IV of this Decision.

B. Applicable Law

49.
Argentina criticises the Tribunal's decision on the applicable law on three grounds. First, it maintains that the Tribunal should not have decided the entire case solely on the basis of the Argentina-France BIT given that León, which remained a Claimant, was a Luxembourg corporation. Secondly, it maintains that the Tribunal wrongly underplayed the importance of Argentine law as part of the applicable law. Lastly, it contends that the decision of the Tribunal in the Award that there was no general requirement that a claimant prove the existence of discrimination in order to establish a breach of the Argentine-France BIT was at odds with what the Tribunal had said in its Jurisdiction Decision.
50.
For Argentina each of these aspects of the Tribunal's findings constitutes an annullable error. It maintains that they involved a manifest excess of power (within Article 52(1)(b)). In addition, Argentina argues that the Tribunal failed adequately to state the reasons for its conclusions on these points, thus making the Award subject to annulment under Article 52(1)(e). Finally, Argentina contends that the manner in which the Tribunal dealt with these issues entailed a serious departure from a fundamental rule of procedure calling for annulment under Article 52(1)(d).
51.
The Committee addresses this aspect of Argentina's challenge to the Award in Part V of this Decision.

C. Derivative Rights and the Umbrella Clause

52.
Argentina also seeks the annulment of the Award on the ground that the Tribunal mishandled the issue of the Claimants' assertion of derivative rights and their reliance on the umbrella clauses in treaties other than the Argentina-France BIT.
53.
Argentina maintains that the Tribunal erred in holding that, contrary to the principle of international law enunciated in the Barcelona Traction, ELSI and Diallo judgments,52 the Claimants could maintain a claim for wrongs which, if they existed at all, had been suffered by EDEMSA and not by the Claimants. It further contends that the Tribunal was wrong in holding that the MFN Clause in the Argentina-France BIT permitted the Claimants to rely upon the umbrella clauses in the Argentina-Luxembourg and Argentina-Germany BITs and that, even if the umbrella clauses were applicable, they did not assist the Claimants as they did not alter the nature of the Concession Agreement as a contract which, so far as the Claimants were concerned, was res inter alios acta. Again, Argentina contends that these errors entailed a manifest excess of power, a failure to state reasons and a serious departure from a fundamental rule of procedure.
54.
This aspect of Argentina's challenge to the Award is addressed in Part VI of this Decision.

D. Necessity

55.
Argentina contends that the Tribunal committed further annullable errors in the way in which it treated the issue of necessity. Its decision not to apply Article 3(2) of the Argentina-Luxembourg BIT, its decision that Article 5(3) of the Argentina-France BIT did not justify the measures taken and its decision that the requirements for a defence of necessity under customary international law were inapplicable are, according to Argentina, grounds for annulment for manifest excess of power and failure to state reasons.
56.
This aspect of the challenge to the Award is addressed in Part VII of the present Decision.

E. Failure to Decide on Fundamental Evidence

57.
Argentina maintains that the Tribunal failed to address fundamental evidence which could have had a decisive influence on the case and thereby committed a manifest excess of power, failed to state the reasons for its decision and seriously departed from a fundamental rule of procedure. This part of Argentina's challenge to the Award concerns primarily evidence from official bodies in the French State critical of EDFI's investment strategy in Argentina and the evidence of Engineer Neme regarding the privatisation of electricity distribution in Mendoza, all of which Argentina claims is ignored in the Award.
58.
The Committee will address this part of Argentina's challenge to the Award in Part VIII of the present Decision.

F. Failures in the Assessment of Damages

59.
Finally, Argentina asserts that the Tribunal's assessment of damages is fundamentally flawed in several ways, including the examination of the question of causation, the evidence referred to in relation to quantum and the assessment of EDEMSA's viability in 2001. Argentina maintains that these errors amount to a manifest excess of power, failure to state reasons and a serious departure from a fundamental rule of procedure.
60.
This part of the challenge to the Award will be considered in Part IX of the Decision.

III. The Nature of Annulment and the Powers of an ad hoc Committee

IV. Challenges to Two Members of the Tribunal

A. Introduction

74.
As outlined above (paras. 46 to 47), Argentina maintains that the Award should be annulled because of the existence of conflicts of interest in the case of both Professor Kaufmann-Kohler and Professor Remón. In each case Argentina contends that the conflict of interest was such that the Tribunal cannot be regarded as having been properly constituted (thus affording a ground for annulment under Article 52(1)(a) of the ICSID Convention). It also argues that, since the right of each party to have the case determined by a tribunal whose members meet the requirements of independence and impartiality constitutes a fundamental rule of procedure, the fact that two members of the Tribunal did not meet those requirements means that there has been a serious departure from that fundamental rule (thus affording a ground for annulment under Article 52(1)(d) of the ICSID Convention).71
75.
Since the facts on which Argentina relies are, for the most part, not in dispute between the Parties, the Committee will briefly set out those facts before reviewing the arguments of the Parties.

B. The facts

1. Professor Kaufmann-Kohler

76.
Professor Kaufmann-Kohler became a director of UBS in April 2006, two and a half years after her appointment as an arbitrator and nearly two years after the Tribunal was constituted.72 It is not in dispute that Professor Kaufmann-Kohler did not inform the Parties of her appointment as a director of UBS. She did, however, give UBS a list of the arbitrations in which she was then involved and asked UBS to investigate whether there was a conflict of interests. According to a letter which she wrote to the other members of the Tribunal (Professor Park and Professor Remón) after she was challenged by Argentina,73 UBS replied that the only conflict was with her involvement as a member of the jury for the America's Cup, a conflict which arose from the fact that UBS sponsored one of the competitors. Professor Kaufmann-Kohler withdrew from the America's Cup jury in light of this response.
77.
Argentina maintains that it became aware of Professor Kaufmann-Kohler's appointment at UBS in November 2007. It then filed a proposal, in accordance with Article 57 of the ICSID Convention,74 that Professor Kaufmann-Kohler be disqualified from the Tribunal.75 In the light of that proposal, Professor Kaufmann-Kohler wrote to UBS inquiring whether the links between EDFI and UBS detailed in Argentina's challenge did in fact exist.76 By a letter dated 20 December 2007, Dr Karin Eugster, Legal Adviser to UBS, and Dr Bernhard Schmid, General Counsel of the Corporate Center of UBS, replied giving details of certain links between UBS and EDFI.77 That letter was sent to the Tribunal on 21 December 2007 under cover of a letter from Professor Kaufmann-Kohler.
78.
Argentina challenged Professor Kaufmann-Kohler on the basis of five connections between UBS and EDFI:-

(a) that UBS had listed EDF, the parent company of EDFI, as one of the companies in which it recommended investment;78

(b) that UBS and EDF had common interests in AEM Milan, an Italian company which was controlled by EDF through a subsidiary;79

(c) that UBS and EDF both held shares in Motor Columbus, a Swiss company,80 although the 20 December 2007 letter from UBS made clear that UBS had disposed of its shareholding in Motor Columbus before Professor Kaufmann-Kohler became a UBS director;

(d) that in October 2005 EDF and the French State had entered into an agreement with a group of financial institutions which included UBS in connection with a share offer in the French financial market;81 and

(e) that the UBS Foundation listed EDF securities as part of its portfolio.82

79.
In addition, on 14 May 2008, Argentina drew the attention of the remaining members of the Tribunal to a press release concerning Professor Kaufmann-Kohler's role in the removal of certain directors of UBS following problems at the bank. According to Argentina, this incident demonstrated the degree of Professor Kaufmann-Kohler's influence on the Board of Directors.83
80.
Finally, Argentina maintained that Professor Kaufmann-Kohler's failure to notify the Parties of her appointment as a director was itself a factor which could raise questions concerning her impartiality or independence.84
81.
In accordance with Article 58 of the ICSID Convention,85 Argentina's challenge to Professor Kaufmann-Kohler was heard by the remaining members of the Tribunal, Professor Park and Professor Remón. They issued their Disqualification Decision on 25 June 2008. That decision dismissed Argentina's proposal for disqualification on the grounds that:

The facts asserted by Respondent give no reason to suppose that Professor Kaufmann-Kohler would be biased in favour of Claimants. Her position as a non-executive director at UBS gives her no financial interest in any of the Claimant companies. Nor would she benefit in any way from an award in favour of Claimants.86

The remaining members of the Tribunal considered whether Professor Kaufmann-Kohler might favour the Claimants on the ground that a victory for them might result in some benefit to UBS "an entity with which Professor Kaufmann-Kohler feels a sense of emotional solidarity and psychological identification by virtue of her position"87 but concluded that:

While the prospect of such subconscious influence can never be completely excluded, the possibility remains remote, tenuous and speculative. The outcome of this arbitration cannot be expected to have any material impact on the fortunes of UBS. Just as de minimis would be the effect on Professor Kaufmann-Kohler's psychological, social or economic well-being.88

82.
The remaining members also concluded that Professor Kaufmann-Kohler had not violated any ICSID obligation of disclosure and that, in any event, "we cannot accept that her nondisclosure of the Board membership indicated a manifest lack of reliability in the exercise of independent judgment".89

2. Professor Remón

83.
As the Committee has already noted (para. 47, above), the challenge to Professor Remón differs, both procedurally and substantively, from that to Professor Kaufmann-Kohler. It differs procedurally, because it was raised only after the proceedings before the Tribunal had been closed. Accordingly, it could not be considered by the remaining members of the Tribunal under the procedure in Article 58 of the ICSID Convention. It differs substantively, because it involves a somewhat different allegation of a conflict of interest.
84.
Prompted by an announcement in the media on 16 April 2012 regarding Argentina's intention to expropriate an investment by the Spanish company Repsol, Professor Remón informed the parties on 18 April 2012 that the law firm in which he is a partner, Uría Menéndez, had traditionally provided legal services to Repsol and that he had personally represented Repsol in various proceedings. He then stated that should Repsol request the assistance of Uría Menéndez regarding the Argentine Republic's measures, he would refrain from taking part in the matter as long as the arbitration proceeding between EDFI and Argentina was ongoing.90 In light of these statements, Argentina requested the resignation of Professor Remón on 27 April 2012. According to Argentina, "he could no longer be relied upon to exercise independent judgment pursuant to Article 14 of the ICSID Convention".91
85.
In response, Professor Remón asserted that his impartiality and independence in the EDFI case had not been compromised, because the drafting of the Award had been "completed several weeks before the announcement of the expropriation".92 Argentina argues, however, that although Professor Remón's letters made reference to information published in the media on 16 April 2012, the arbitration proceedings subsequently commenced by Repsol (in which it was represented by Uría Menéndez) also concerned measures emanating from an earlier date. According to Argentina, this fact, compounded by Professor Remón's position in the law firm and the firm's previous representation of Repsol, points to the conclusion that Professor Remón knew about the dispute between Repsol and the Argentine Republic during the deliberations and the drafting of the Award in the present case, thereby compromising his independence and impartiality.93

C. Arguments of the Parties

1. Argentina

a. General

86.
As the Committee has already noted, Argentina bases this part of its case for the annulment of the Award on both Article 52(1)(a) and 52(1)(d) of the ICSID Convention. It maintains that a tribunal cannot be regarded as properly constituted for the purposes of Article 52(1)(a) if one of its members did not offer the guarantee of independence and impartiality required by Article 14(1) of the Convention.94 In addition, it contends that for a tribunal to hear a case when one of its members could not be relied upon to be independent and impartial entailed a serious departure from a fundamental rule of procedure affecting due process and a respondent's right of defence, warranting annulment of the award under Article 52(1)(d).95
87.
According to Argentina, the standard required by Article 14(1) is that an arbitrator must be someone who can be relied upon to be impartial and to exercise independent judgement. Under Article 57, there has to be a manifest lack of those qualities. That exists where it can be discerned with little effort and without deeper analysis.96 Argentina contends that the decision on disqualification by the Chairman in Blue Bank97 confirms that, when a party challenges an arbitrator it need not prove actual bias but only the appearance of bias.98
88.
According to Argentina, an ad hoc committee is empowered to determine whether or not such a conflict of interest exists and to annul the award if it concludes that one of the members of the tribunal manifestly lacked the qualities required by Article 14(1). That is the case irrespective of whether a challenge has been rejected by the remaining members of the tribunal in proceedings under Article 58 of the ICSID Convention.99 In such a case, Argentina maintains that an ad hoc committee has to approach the matter de novo and is not bound to follow the findings of fact or the ruling on the law made by the remaining members of the tribunal.100 Argentina contends that, if an ad hoc committee concludes that one of the members of the tribunal manifestly lacked the qualities required by Article 14(1), then it is required to annul the award. It denies that the committee has a discretion not to annul in such a case.101

b. Professor Kaufmann-Kohler

89.
With regard to the position of Professor Kaufmann-Kohler, Argentina contrasts the findings made by Professor Park and Professor Remón in the Disqualification Decision with the analysis of a very similar allegation of conflict of interests, also arising out of Professor Kaufmann-Kohler's membership of the UBS Board, by the ad hoc committee in Vivendi II.102 In its decision in that case, the ad hoc committee was, according to Argentina, highly critical of Professor Kaufmann-Kohler's conduct. The Vivendi II committee had before it evidence from Professor Wolfram and Professor Mistelis on the independence of arbitrators.103 The Vivendi II Committee commented:

As to the basic issue of the compatibility of a directorship in a major international bank and the function of international arbitrator, Professor Wolfram, strongly supported by Professor Mistelis during the hearing, makes the obvious point that a director in the exercise of his or her function is under a fiduciary duty vis-à-vis the shareholders of the bank to further the interests of the bank and therefore postpone [sic] conflicting interests.

That is fundamentally at variance with his or her duty as independent arbitrator in an arbitration involving a party in which the bank has a shareholding or other interest, however small it may be. Since a major international bank has connections with or an interest in virtually any major international company (which companies are also the most likely to end up in international arbitrations), this suggests that the positions of a director of such a bank, and that of an international arbitrator, may not be compatible and should not be, or in a modern international arbitration environment, should no longer be combined.104

90.
The Vivendi II decision continued:

The ad hoc Committee thus understands the argument that the... Tribunal was no longer properly constituted after the board appointment of Professor Kaufmann-Kohler, and that there was a serious departure from a fundamental rule of procedure and considers that this could lead to annulment whenever justified within the context of the case under consideration.105

91.
The Vivendi II Committee did not, however, annul the award in that case, because it concluded that Professor Kaufmann-Kohler had not become aware of the existence of UBS interests in the claimant companies until after the award had been rendered and the Committee consequently accepted "that the relationship between UBS and the Claimants had no material effect on the final decision of the Tribunal, which was in any event unanimous".106 Argentina points out that no such consideration applies in the present case, since Professor Kaufmann-Kohler became aware of the connection between UBS and EDFI not later than December 2007 when she received the letter from Dr Karin Eugster and Dr Bernhard Schmid.107 Argentina therefore maintains that the conflict of interest created by Professor Kaufmann-Kohler's membership of the UBS Board should lead to the annulment of the Award.108

c. Professor Remón

92.
With regard to Professor Remón, Argentina begins by explaining that it was unable to submit a proposal for his disqualification to the remaining members of the Tribunal, because it only became aware of his involvement with Repsol when it received his letter of 18 April 2012 whereas the proceedings had been declared closed on 13 March 2012. It had, however, expressly reserved its rights under Article 52(1)(a) and (d).109
93.
Given the professional links between Professor Remón and his law firm, and between the latter and Repsol, Argentina maintains that a third party would perceive an obvious appearance of lack of impartiality.110 Further, Argentina asserts that the Repsol dispute materialized at the end of 2011, before the deliberations and drafting of the Award in the present case were concluded.111
94.
In any event, Argentina maintains that, given the advice Professor Remón and his firm were providing Repsol during the deliberations, and given the fact that Repsol was during that time planning and implementing a legal strategy against Argentina, the date when the dispute finally materialized is almost irrelevant.112 Additionally, Professor Remón's obligation of impartiality and independence did not end when the Tribunal concluded its deliberations and drafting, but when the Award was actually rendered, which happened only after the disclosure.113

2. The Claimants

a. General

95.
The Claimants disagree with Argentina regarding the role and powers of an ad hoc committee confronted with the argument that a member, or members, of a tribunal lacked the requisite qualities of independence and impartiality. In their view, Articles 57 and 58 of the ICSID Convention, together with Rule 9 of the Arbitration Rules, require that any challenge to an arbitrator be made in a timely fashion (otherwise it will be deemed to have been waived, by virtue of Rule 27 of the Arbitration Rules) and that it be made to the remaining members of the tribunal (or, in certain circumstances to the Chairman of the ICSID Administrative Council). While the Claimants accept that, if the facts on which a challenge is based do not come to light until after proceedings have closed, recourse to this procedure is impossible and the matter can therefore be brought before an ad hoc committee, they maintain that the only ground on which annulment can be sought is that of a serious departure from the fundamental rules of procedure (Article 52(1)(d) of the ICSID Convention). The Claimants deny that Article 52(1)(a) is relevant, since the reference to the tribunal having been "properly constituted" refers to whether the correct procedures for the appointment of arbitrators were followed, not to whether the arbitrators meet the requirements of independence under Article 14(1) of the ICSID Convention.114
96.
Moreover, where a challenge was made to, and rejected by, the remaining members of the tribunal, the Claimants contend that the role of the ad hoc committee is even more limited. Initially, the Claimants contended that, in such a case, it is not open to the aggrieved party to raise the issue at all in annulment proceedings since annulment is available only in respect of the award itself and not in respect of the separate decision on disqualification.115 In this respect, the Claimants refer to the decision of the ad hoc committee in Azurix.116 The Azurix Committee held that Article 52(1)(a) of the ICSID Convention was concerned only with the procedure for appointment of arbitrators and not with whether the requirements of Article 14(1) of the Convention were satisfied. It concluded that "a Committee would only be able to annul an award under Article 52(1)(a) if there had been a failure to comply properly with the procedure for challenging members of the tribunal set out in the other provisions of the ICSID Convention".117
97.
At the hearing, the Claimants to some extent resiled from this position. They now accept that an ad hoc committee can review the question whether an arbitrator met the requirements of Article 14(1) of the ICSID Convention in a case where the conclusion of the remaining members of the tribunal that that arbitrator did meet those requirements is so untenable that it is one which no reasonable decision-maker could have reached.118 However, the Claimants consider that the committee may not approach the matter de novo, that it is bound by the factual findings of the original decision-maker (i.e. the remaining members of the tribunal or the Chairman of the Administrative Council) and that it should defer to the legal findings of that body.119 According to the Claimants, the Vivendi II decision, far from supporting Argentina's case, merely serves to demonstrate how high is the standard for challenge to an arbitrator in annulment proceedings.120 It is necessary for the party seeking annulment to show that there was a manifest lack of the qualities required by Article 14(1) of the ICSID Convention and that the lack of independence and impartiality of the arbitrator had a material effect on the outcome of the proceedings.121 The Claimants also maintain that the burden of proof lies with the party challenging an award and that, in case of doubt, there is a presumption in favour of the validity of an award.122 Finally, the Claimants contend that even where a ground for annulment is made out, a committee has a discretion whether or not to annul the award and that, in the present case, the length of the proceedings and the hardship which annulment would cause to the Claimant suggest that it would be proper for the Committee to exercise its discretion not to annul the award even if it finds that one of the grounds for annulment has been made out.123

b. Professor Kaufmann-Kohler

98.
With regard to Professor Kaufmann-Kohler, the Claimants maintain that "given that the factual predicate upon which this claim is based was squarely rejected by the authority empowered to decide that issue, Argentina's claims must be dismissed as an impermissible attempt at appeal".124 The Claimants point to the findings in the Disqualification Decision that the links between Professor Kaufmann-Kohler's participation in the UBS Board and EDFI were minimal and indirect and the finding that there was no evidential basis for holding that those links would have affected Professor Kaufmann-Kohler's approach to the case. The Claimants emphasise that the test of appearance of bias is an objective one; it is not enough that a party states that it considers there is an appearance of bias; it is necessary to establish that a reasonable person in possession of all the facts would conclude that there was a reasonable likelihood of bias.
99.
The Claimants deny that the analysis in the Disqualification Decision is in any way untenable. They point to the fact that the remaining members of the tribunal in Suez Sociedad General de Aguas de Barcelona SA and InterAguas Servicios Integrales del Agua SA v. Argentine Republic (ICSID Case No. ARB/03/17) and Suez Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v. Argentine Republic (ICSID Case No. ARB/03/19), decision of 12 May 2008 (" Suez II "), confronted with a challenge to Professor Kaufmann-Kohler based upon her membership of the UBS Board, rejected that challenge on grounds very similar to those in the Disqualification Decision in the present case. According to the Claimants, the fact that another tribunal reached the same conclusion on closely similar facts is a powerful indication that the decision in the present case was not unreasonable.
100.
The Claimants distinguish Vivendi II on the basis that the links between UBS and Vivendi were closer than the links on which reliance is placed in the present case. They also emphasise that the Vivendi II Committee did not, in the event, annul the award in that case. In this context, the Claimants point to the considerable weight given by the Committee in Vivendi II to the fact that the award in that case was unanimous and stress that the same is true of the Award in the present proceedings.
101.
Finally, the Claimants endorse the finding of the remaining members of the Tribunal that the failure to disclose Professor Kaufmann-Kohler's appointment to the UBS Board was not a ground for annulment of the Award and point to the fact that the Suez II decision was to the same effect.

c. Professor Remón

102.
According to the Claimants, Argentina's challenge to Professor Remón merely invokes Article 52 of the ICSID Convention as a ground for seeking annulment but fails to substantiate its claim; Argentina asks the Tribunal to assume certain facts that allegedly prove Professor Remón's lack of impartiality.125
103.
The Claimants argue that even on the limited discussion provided by Argentina, the circumstances surrounding Professor Remón's disclosure do not justify annulment.126 The drafting of the Award had been concluded well before 16 April 2012 when the media reported the Argentine Government's intention to expropriate the stake that Repsol had in the Argentine company YPF. On 18 April 2012, Professor Remón sent his disclosure to the parties.127 On 27 April 2012, Argentina requested the resignation of Professor Remón.128 On 11 May 2012, Professor Remón responded to the parties comments and informed them of the completion of the deliberations and drafting of the Award several weeks before the expropriation announcement,129 something which was confirmed by Professor Kaufmann-Kohler in a letter which she sent to the Tribunal on the same date.130 The Award was signed thereafter by all three Tribunal members.131 According to the Claimants, even if there was a conflict of interest, which it denies, such conflict could not have had a material effect on the outcome.132
104.
Regarding Argentina's argument that the requirement that an arbitrator be independent and impartial exists until the award is rendered, the Claimants counter that neither they nor Professor Remón have ever suggested otherwise. In fact, Professor Remón stated in his letter that he would refrain from taking part in the Repsol matter as long as these "proceedings are ongoing".133
105.
The Claimants state that if, as argued by Argentina, it were the case that the conflict materialized in 2011, Argentina should have raised the issue then. By failing to do so, Argentina waived its right to challenge the Award on the basis of an alleged conflict of interests which had already arisen before the Award was completed.134
106.
In any event, the Claimants argue, Argentina has not met the high threshold for annulment to be warranted in this case. Indeed, Professor Remón stated that he would not assume representation of Repsol as long as the present arbitration was ongoing. Contrary to what Argentina suggests, this declaration was not an admission that Prof. Remón would become adverse to Argentina as soon as this case was over. Moreover, the IBA Guidelines on Conflict of Interests impose no obligation of independence and impartiality once the arbitration has concluded and the tribunal becomes functus officio.135 Finally, the Claimants again highlight the fact that the Award was rendered unanimously.136

D. The Decision of the Committee

1. The Legal Framework

a. Article 14(1) of the Convention

107.
The qualifications which members of ICSID arbitration tribunals are required to possess are set out in Article 14(1) of the Convention. The English text of Article 14(1) provides that:

Persons designated to serve on the Panels shall be persons of high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment. Competence in the field of law shall be of particular importance in the case of persons on the Panel of Arbitrators. (Emphasis added.)

Although that provision deals with the qualifications which must be possessed by persons appointed to the Panel of Arbitrators137 maintained by ICSID in accordance with Articles 12 and 13 of the Convention, Article 40(2) requires that "arbitrators appointed from outside the Panel of Arbitrators shall possess the qualities stated in paragraph (1) of Article 14".

110.
The standard of appraisal was also the subject of detailed analysis in the decision of the two remaining arbitrators on a challenge to an arbitrator in SGS v. Pakistan :

The standard of appraisal of a challenge set forth in Article 57 of the Convention may be seen to have two constituent elements: (a) there must be a fact or facts (b) which are of such a nature as to ‘indicat[e] a manifest lack of the qualities required by' Article 14(1). The party challenging an arbitrator must establish facts, of a kind or character as reasonably to give rise to the inference that the person challenged clearly may not be relied upon to exercise independent judgment in the particular case where the challenge is made. The first requisite that facts must be established by the party proposing disqualification, is in effect a prescription that mere speculation or inference cannot be a substitute for such facts. The second requisite of course essentially consists of an inference, but that inference must rest upon, or be anchored to, the facts established. An arbitrator cannot, under Article 57 of the Convention, be successfully challenged as a result of inferences which themselves rest merely on other inferences.145

b. The Convention Machinery for Challenging an Arbitrator

112.
In addition to specifying the qualities which an arbitrator must possess, the Convention also lays down a machinery by which a party may challenge an arbitrator about whom it considers there is reason to doubt that he or she lacks one or more of those qualities. Article 57 of the Convention provides in relevant part that:

A party may propose to a Commission or Tribunal the disqualification of any of its members on account of any fact indicating a manifest lack of the qualities required by paragraph (1) of Article 14.

That provision has to be read together with Article 58, which states that:

The decision on any proposal to disqualify a conciliator or arbitrator shall be taken by the other members of the Commission or Tribunal as the case may be, provided that where those members are equally divided, or in the case of a proposal to disqualify a sole arbitrator, or a majority of the conciliators or arbitrators, the Chairman shall take that decision. If it is decided that the proposal is well-founded the conciliator or arbitrator to whom the decision relates shall be replaced in accordance with the provisions of Section 2 of Chapter III or Section 2 of Chapter IV.

113.
A number of points need to be borne in mind regarding these provisions. First, these provisions make clear that the decision on a challenge to an arbitrator for failure to meet the requirements of Article 14(1) should normally be taken by the two remaining members of the Tribunal, while providing a default decision-maker, in the form of the President of the World Bank in his capacity as Chairman of the ICSID Administrative Council,148 to resolve that question in the cases specified in Article 58.
114.
Secondly, because only a duly constituted tribunal can take a decision, a challenge may be brought under Article 57 only once the tribunal in the case has been constituted. Moreover, Rule 9(1) of the Arbitration Rules is explicit that a proposal under Article 57 may not be made after the proceedings have been declared closed.
116.
Lastly, Article 57 expressly requires that a proposal for disqualification be based upon facts indicating a "manifest" lack of the qualities required by Article 14(1) of the ICSID Convention. The term "manifest" is not defined in Article 57. Schreuer's Commentary points out that the case-law on the meaning of the same term in Article 52(1)(b) (annulment on the ground that a tribunal "manifestly exceeded its powers") has not always been consistent, sometimes treating "manifest" as referring to the ease with which the fault can be perceived and sometimes as related to the gravity of the fault.150 In the context of Article 57, however, the prevailing view is that "manifest" means "evident" or "obvious" and that, in the words of the Blue Bank decision "it relates to the ease with which the alleged lack of the qualities can be perceived".151 In the present case, both Parties have adopted this approach and the Committee agrees that it represents the correct interpretation of Article 57.

c. The Role of an ad hoc Committee

117.
Since Articles 57 and 58 establish a machinery for dealing with challenges to arbitrators, the next question to be considered is whether there is any role for an ad hoc committee, or, to put the matter differently, can the fact that there is reason to doubt whether one or more of the members of a tribunal possessed the qualities required by Article 14(1) of the Convention constitute a ground for annulment under Article 52?
118.
The Azurix Committee considered that that question had to be answered in the negative. Since the role of annulment was strictly limited under the Convention and Articles 57 and 58 created a machinery for the resolution of challenges to arbitrators, the Azurix Committee concluded that an ad hoc committee was limited to examining whether or not there had been a serious departure from a fundamental rule of procedure in the way in which the challenge had been addressed.152 Even where the facts said to demonstrate that an arbitrator lacked the requisite qualities came to light only after the proceedings had closed, and thus could not be dealt with under Articles 57 and 58, the Azurix Committee considered that the matter could not be a basis for annulment but could only be raised by way of proceedings for the revision of the award under Article 51.153 By contrast, the Vivendi II Committee, faced with a challenge to Professor Kaufmann-Kohler based upon facts which had come to light only after the proceedings had closed, was clear that such matters could constitute grounds for annulment.154
119.
Whether the existence of facts suggesting that an arbitrator lacks the qualities required by Article 14(1) of the ICSID Convention is capable of being a ground for annulment depends, first, on whether this matter falls within any of the five grounds for annulment set out in Article 52.
128.
Moreover, the Committee does not consider that the question whether or not a tribunal has been properly constituted is one which can be answered only at the outset of proceedings. While it is obviously necessary to establish that a tribunal is properly constituted at the time that it begins work,155 once it is accepted that the proper constitution of the tribunal requires that each of its members fulfil the requirements of Article 14(1), it becomes clear that changes in the circumstances of an arbitrator may mean that a tribunal which was properly constituted at the outset may cease to be so during the course of the proceedings.
129.
That still, however, leaves the question how an ad hoc committee is to discharge its role under Article 52 in respect of allegations about the independence and impartiality of an arbitrator. In this respect, the Committee considers that there is an important difference between those cases in which the issue of disqualification has been raised under Article 57 and rejected under Article 58 and those in which it has not. That distinction is particularly important in the present case, because Argentina's case for annulment in respect of its challenge to Professor Kaufmann-Kohler falls into the first category, whereas its case with regard to Professor Remón falls into the second.

(1) The role of an ad hoc committee where no challenge has been made under Article 57

133.
The Claimants contend that, even if it concludes that there were reasonable grounds to doubt the impartiality or independence of a member of the tribunal, a committee may annul only if it concludes that there was a material effect on the award. The Committee has difficulty in accepting this proposition, at least in the terms in which it was put by the Claimants.157 It has already been established that the test is not one of whether an arbitrator actually lacked independence or impartiality but whether a reasonable third person, with knowledge of all the facts, would consider there were reasonable grounds for doubting that an arbitrator possessed the requisite qualities of independence and impartiality (see paras. 109 and 111, above). The Committee notes that it will generally be difficult to show how reasonable doubts about the independence or impartiality of an arbitrator - as opposed to actual bias or lack of independence - had a material effect on the award. Even in the case of actual bias or lack of independence, it may still be difficult to establish that such an effect existed, because of the confidentiality of the deliberations.

(2) The role of an ad hoc committee where a challenge has been made, and rejected, under Article 57

137.
We turn then to the other category of case, namely one in which the party seeking annulment had proposed disqualification of the arbitrator during the proceedings but the remaining members of the tribunal (or the Chairman of the Administrative Council in those cases for which Article 58 so provides) hearing the matter under Article 58 of the ICSID Convention had dismissed the proposal. Here the entire procedural context is different. There is an existing evidential record which has been considered by the remaining members of the tribunal (or the Chairman) and their decision will contain findings of fact, as well as rulings on the legal issues arising from the facts as found. The question, therefore, is what is the relationship between those findings and rulings by the Article 58 decision-maker and the role of the ad hoc committee at the annulment stage?
138.
On this question the Parties are in marked disagreement. Argentina argues that the role of the ad hoc committee is the same as it is in a case where no previous challenge has been made, namely to examine the issues de novo and take a decision. The Claimants, on the other hand, now contend (see paras. 96 to 97, above) that the committee's role is to review whether or not the decision taken under Article 58 was tenable, in the sense that it was one which a reasonable decision-maker could take. According to the Claimants, it is not open to a committee to reconsider the facts or to substitute its own view for that of the body charged with taking the decision under Article 58.
141.
The Committee considers that the second consideration must lead it to reject the approach taken by the Azurix Committee, namely that an ad hoc committee has no role in respect of a challenge to an arbitrator which had been considered by the remaining members of the tribunal under Articles 57 and 58 of the Convention beyond examining whether there had been a serious departure from a fundamental rule of procedure in the manner in which the remaining members had dealt with the proposal for disqualification. The Committee considers that such an approach is incompatible with the duty of an ad hoc committee to safeguard the integrity of the arbitral procedure. It thus rejects the position initially adopted on this issue by the Claimants, while observing, as it has already noted, that the Claimants resiled from that position at the hearing (see para. 97, above).
142.
Nor, however, can the Committee accept that, as Argentina has suggested, an ad hoc committee should approach the issue of an arbitrator's independence and impartiality de novo, thus disregarding entirely the outcome of the proceedings under Articles 57 and 58. To do so would be incompatible with the scheme for resolving challenges to arbitrators devised by those who concluded the ICSID Convention. That scheme was designed to resolve such challenges swiftly and at the earliest possible stage of the proceedings, so that the parties were not involved in the expense and loss of time necessarily involved in obtaining a final award from the tribunal before it was established that the tribunal - as constituted - was entitled to hear the case. By contrast, reference to an ad hoc committee can be made only after a final award has been made by a tribunal. During the negotiation of the ICSID Convention a proposal that a party be given an immediate right of recourse to an ad hoc committee after the tribunal had decided that it was properly constituted, without having to wait for the award, was defeated.159 To allow a party which had unsuccessfully challenged an arbitrator at an early stage of the proceedings to raise the same challenge for consideration de novo before an ad hoc committee, after what may well have been lengthy and expensive proceedings on the merits, would run completely counter to the scheme for early resolution of a challenge. In effect, the proceedings under Articles 57 and 58 would serve no useful purpose, other than to ensure that the right to challenge the arbitrator was not waived; it would be as if such proceedings had never taken place.
143.
Moreover, it must be recalled that annulment proceedings are not an appeal (see Part III, above). The role of an ad hoc committee in proceedings for the annulment of an award is not to determine whether the tribunal was correct in the decisions that it took; it is a supervisory role, limited to determining whether or not one of the grounds of annulment has been made out. The fact that questions as to whether or not a member of the tribunal which issued the award possessed the requisite qualities of independence and impartiality goes to a matter of fundamental importance does not alter the relationship between the role of the ad hoc committee and that of the body entrusted with making the original decision. The question whether a tribunal has exceeded its jurisdiction is equally fundamental. Just as Article 57 entrusts decisions on challenges to an arbitrator to the remaining members of the tribunal (or the Chairman of the Administrative Council), so Article 41 empowers the tribunal to determine a challenge to its jurisdiction. Ad hoc committees have, however, declined to accept that every jurisdictional error has to be considered annullable, or to treat applications for annulment based on jurisdictional error as more akin to appeals.160
146.
It is within this legal framework that the Committee has considered Argentina's application for annulment on the basis of the alleged lack by Professor Kaufmann-Kohler and Professor Remón of the requisite qualities of independence and impartiality.

2. Professor Kaufmann-Kohler

147.
The facts on which Argentina bases its claim that Professor Kaufmann-Kohler lacked the requisite qualities of independence and impartiality are set out in paras. 76 to 82, above. They are not in dispute. The grounds of Argentina's claim before the Committee are the same as those raised (see para. 81, above) before the remaining members of the Tribunal.161 The Disqualification Decision given by the remaining members, after reviewing the facts and the procedure which had been followed for dealing with Argentina's challenge, noted that the relevant test was "whether Professor Kaufmann-Kohler ‘may be relied upon to exercise independent judgment'" and stated that "if reasonable doubts exist on this matter, she should cease to serve in these proceedings".162 As noted in paras. 81 to 82, above, Professors Park and Remón concluded that Professor Kaufmann-Kohler's non-executive directorship at UBS gave her no financial interest in any of the Claimant companies and that she would not benefit in any way from an award in their favour.163 They also rejected as "remote, tenuous and speculative" the suggestion that, even without any prospect of financial benefit, Professor Kaufmann-Kohler might favour EDFI on the ground that she had a sense of solidarity with UBS.
148.
Professors Park and Remón then reviewed each of the five grounds (see para. 78, above) on which Argentina maintained that there existed between UBS and EDFI connections sufficient to give rise to a conflict of interest on the part of Professor Kaufmann-Kohler once she had become a director of UBS. They concluded as follows:-

(a) with regard to the fact that UBS recommended EDF, the parent company of EDFI, as a good investment opportunity, they noted that this gave Professor Kaufmann-Kohler no direct incentive to favour EDFI and concluded that "the connection remains speculative and indirect, and thus not determinative for the purposes of this challenge".164 They considered, however, that "a different conclusion might be indicated if an arbitrator held a substantial equity stake in a bank which owned and actively promoted a company that was party to the relevant proceedings".165

(b) with regard to the fact that UBS and a subsidiary of EDF both held shares in AEM Milan, they noted that UBS's stake in AEM was below 1.5% and was held in the ordinary course of its business activity as one of the largest banks in the world. They did not consider that it could affect the independence of Professor Kaufmann-Kohler.166

(c) they reached a similar conclusion with regard to the fact that UBS and EDF had both held shares in Motor Columbus,167 a conclusion which was reinforced by the fact that UBS had sold its shareholding before Professor Kaufmann-Kohler became a director.168

(d) with regard to the involvement of UBS in a consortium that assisted in the placement of EDF shares on the French market, they noted that UBS had not itself bought shares in the course of this placement and concluded that "we are unable to perceive any link between that consortium's activity and the way Professor Kaufmann-Kohler will evaluate the issues in this case".169

(e) it was the fact that the UBS Investment Foundation held an investment in EDF that the remaining members of the Tribunal considered "stands on a somewhat different footing from Respondent's other arguments". They noted, however, that the Foundation is an institution for the collective investment of assets by Swiss pension funds. Ultimately, the assets of the Foundation will benefit the various Swiss pension funds that have joined in the institutions which participate in the Foundation.170

They also noted that the total investment in EDF fell below 1.5%. Even had the investment in EDF been held by UBS itself, Professors Park and Remón considered that "a stake of less than 1.5% would not be significant enough to have an impact on the independence of Professor Kaufmann-Kohler."171

149.
Finally, Professors Park and Remón considered whether Professor Kaufmann-Kohler's failure to disclose her directorship of UBS was, in itself a sufficient ground for disqualification. They concluded that it was not:

With respect to the alleged failure to disclose, we cannot accept that nondisclosure of the Board membership indicates a manifest lack of reliability in the exercise of independent judgment, the standard to be applied in this challenge. Whatever level of disclosure might be required under the ICSID Convention, a failure to inform the parties about this Board membership does not rise to that plane.172

150.
Professors Park and Remón also considered in detail the report by Professor Wolfram, submitted by Argentina, the decision of the United States Court of Appeals in New Regency Productions Limited v. Nippon Herald Films Inc., 501 F 3d 211 (9th Circuit, 2007) to which Argentina had drawn their attention, and the press release regarding Professor Kaufmann-Kohler's role in removing certain officials of UBS but concluded that none of them altered the conclusions they had reached.
152.
Nor is there any suggestion that the remaining members of the Tribunal applied the wrong standard. It is true that in setting out that standard the Disqualification Decision refers only to whether Professor Kaufmann-Kohler "may be relied upon to exercise independent judgment" and makes no separate mention of a requirement of impartiality,173 whereas the Committee has held that the standard laid down in Article 14 of the Convention, taking account of the English, French and Spanish texts, is one of independence and impartiality (see para. 108, above). However, other passages in the Disqualification Decision make clear that Professors Park and Remón had both impartiality and independence in mind. Thus, they opined that "non-disclosure in itself cannot be a ground for disqualification, it must relate to facts that would be material to a reasonable likelihood of impartiality or lack of independence, which is not the case here".174 In the circumstances, the Committee does not consider that the fact that the remaining members of the Tribunal formulated the standard as they did can sustain the conclusion that their decision was one which no reasonable decisionmaker could have made.
153.
Nor is there a plausible argument that the Disqualification Decision did not address the different elements in Argentina's proposal to disqualify Professor Kaufmann-Kohler. As the Committee has endeavoured to show, that decision meticulously addressed each and every element which was said to demonstrate that Professor Kaufmann-Kohler lacked the requisite qualities of independence and impartiality.
154.
Argentina's case before the Committee comes down, therefore, to an argument that the Disqualification Decision came to the wrong conclusion. In advancing that argument, Argentina relies heavily upon the decision of the ad hoc Committee in Vivendi II. As the Committee has already explained (see paragraphs 89 to 91, above), that decision took a far more critical view of Professor Kaufmann-Kohler's position than did the Disqualification Decision in the present case, although the Vivendi II Committee ultimately decided not to annul the award. Since the fact of Professor Kaufmann-Kohler's appointment to the UBS Board did not come to light until after the proceedings in Vivendi II had been closed, the ad hoc Committee in that case necessarily had to approach the question whether there was reason to doubt Professor Kaufmann-Kohler's independence or impartiality de novo.
155.
The Committee has studied the decision in Vivendi II with care. It notes, however, that, although, as in the present case, Vivendi II was concerned with Professor Kaufmann-Kohler's directorship of UBS, there are nevertheless differences between the two cases. In particular, there is a difference between the investment which UBS was found to have in the claimants in Vivendi II and its investment in EDF in the present case. As has already been explained, the investment in the present case consisted of a share of less than 1.5% in EDF, the parent company of the Claimant, EDFI. That investment was held by the UBS Foundation for the benefit of various Swiss pension funds. The other UBS shareholdings - in AEM Milan and its former shareholding in Motor Columbus - were in companies that were part-owned by the parent company of EDFI and were not involved in the arbitration. By contrast, in Vivendi II, it seems that UBS was the largest shareholder in the Claimant itself.175 In commenting on the decisions on disqualification in the present case and in Suez II, the Vivendi II Committee commented that

Each relationship was different and must, like the relationship between UBS and Vivendi, be considered individually. Notably, a larger or smaller participation of UBS in the one or in the other company may have relevance in this connection. (Emphasis added)176

The Tribunal in the present case also considered that the size of an investment might be important in this regard.177

156.
In addition, the Committee notes that the Vivendi II Committee placed considerable weight on what it described as "the obvious point that a director in the exercise of his or her function is under a fiduciary duty vis-à-vis the shareholders of the bank to further the interests of the bank and therefore postpone [ sic ] conflicting interests" and considered that "that is fundamentally at variance with his or her duty as independent arbitrator in an arbitration involving a party in which the bank has a shareholding or other interest, however small it may be".178 On that basis, the Vivendi II Committee considered that

Since a major international bank has connections with or an interest in virtually any major international company (which companies are also the most likely to end up in international arbitrations), this suggests that the positions of a director of such a bank, and that of an international arbitrator, may not be compatible and should not be, or in a modern international arbitration environment, should no longer be combined.179

157.
The Vivendi II Committee emphasised, in this context, the report of Professor Wolfram (which is also part of the record in the present case) and the evidence of Professor Mistelis (which is not). Since the present Committee has not seen the evidence of Professor Mistelis, it cannot tell on what basis he suggested that there might be a conflict between the fiduciary duty of a director and the duty of an arbitrator and, specifically, whether he based his comments on any particular legal system's rules on fiduciary obligations. Before the present Committee, Argentina rightly did not attempt to rely upon Professor Mistelis180 and there is no evidence before the Committee regarding fiduciary duties under any particular system of law. The Committee can only, therefore, consider this issue as a matter of general principle and in the light of the report of Professor Wolfram. On that level, however, the Committee is not persuaded that a director of a bank would have a fiduciary duty to the shareholders of the bank to act in any particular way when sitting as an arbitrator. The point which was emphasised by the Vivendi II Committee was that "a director in the exercise of his or her function is under a fiduciary duty vis-à-vis the shareholders of the bank" (emphasis added). The phrase "in the exercise of his or her function" can only refer to that person's function as a director. If a non-executive director of a bank sits as an arbitrator, they are not acting in the exercise of their function as a director when they exercise the quite different function of arbitrator. Of course, a conflict of interest might arise in such a case - it would obviously do so if the bank was a party to the arbitration in question - but, at least as a matter of general principle, it would not be the existence of any fiduciary duty to the shareholders of the bank which would be the basis of that conflict.
158.
The Committee also notes the observation of the Vivendi II Committee that the roles of director of a major international bank and arbitrator "may not be compatible and should not be, or in a modern international arbitration environment, should no longer be combined". It may be the case that, in future, such positions will not be combined. The Committee notes that Professor Kaufmann-Kohler has resigned from the UBS Board. However, what the position should be in the future is not the issue. What matters for the purposes of the present proceedings is whether the remaining members of the Tribunal acted unreasonably in concluding that Professor Kaufmann-Kohler's directorship of UBS did not require her disqualification.
159.
That another reasonable tribunal could have reached the same decision as Professors Park and Remón is clear from the fact that another tribunal did in fact do so. In the Suez II decision on disqualification, which again involved a proposal to disqualify Professor Kaufmann-Kohler on the grounds of her directorship of UBS, the remaining members of the tribunal -Professors Salacuse and Nikken - dismissed the proposal to disqualify. They held (for the same reasons as this Committee, see para. 108, above) that an arbitrator was required to be both independent and impartial.181 Having noted the size of UBS and the enormous range of its investments,182 they held that Professor Kaufmann-Kohler's membership of the UBS Board did not in itself give rise to a conflict of interest, as UBS was not involved in the arbitration, but was relevant only because it might suggest a degree of connection between Professor Kaufmann-Kohler and the claimants since UBS held shares in the claimants on behalf of third parties.183 They then stated:

But the fact of an alleged connection between a party and an arbitrator in and of itself is not sufficient to establish a fact that would establish a manifest lack of that arbitrator's impartiality and independence. Arbitrators are not disembodied spirits dwelling on Mars who descend to earth to arbitrate a case and then immediately return to their Martian retreat to await inertly the call to arbitrate another. Like other professionals living and working in the world, arbitrators have a variety of complex connections with all sorts of persons and institutions.184

160.
What was necessary, according to Professors Salacuse and Nikken, was to evaluate the degree of connection between the arbitrator and the party to the arbitration by reference to the proximity, intensity, dependence and materiality of that connection. In relation to Professor Kaufmann-Kohler's connection with the claimants as a result of her membership of the UBS Board, they found that the link fell short of anything which would give rise to reasonable doubts about her impartiality or independence. The UBS investment was not strategic and "with respect to any alleged benefit flowing to UBS as a result of this arbitration, it should be pointed out that UBS's holding in Suez and Vivendi would have an insignificant effect on UBS profitability given the enormous size and scope of UBS global operations".185 Under the system which prevails in Switzerland of separation of the Board of Directors from the management of a company, Professor Kaufmann-Kohler had no knowledge of the UBS shareholdings in the claimants until the challenge, had no role in making them or in monitoring their performance, and "no direct relationship with the claimants by virtue of her directorship".186 There was no frequency of interaction between Professor Kaufmann-Kohler and the claimants and Professor Kaufmann-Kohler would derive no benefit from an award in favour of the claimants. Professors Salacuse and Nikken also rejected the argument that Professor Kaufmann-Kohler's failure to disclose her membership of the UBS Board was indicative of a lack of impartiality or independence. Such a duty arose only where the arbitrator reasonably believed that circumstances existed which might cause a reasonable person to doubt whether that arbitrator would behave independently and impartially. Professor Kaufmann-Kohler had inquired with UBS about conflicts of interest and been told that (with the exception of her participation in the Americas Cup Jury) there were none; it had been reasonable for her to rely upon that advice.187
161.
The Committee considers that both the Disqualification Decision in this case and the one in Suez II are carefully reasoned and comprehensive in their consideration of the issues. The Disqualification Decision in the present case carefully assesses the significance of the indirect links which Professor Kaufmann-Kohler's membership of the Board of UBS created with EDFI. The Committee considers that Professors Park and Remón were plainly correct in identifying the ownership by the UBS Foundation of shares in EDFI's parent company, EDF, as the critical issue. The fact that UBS and another subsidiary of EDF held shares in AEM Milan did not give UBS an interest of any kind in the success or failure of EDF or EDFI. A fortiori, no conflict of interest could arise from the fact that UBS had held shares in Motor Columbus, in which EDF also had a substantial shareholding, given that it had disposed of those shares before Professor Kaufmann-Kohler became a director of UBS. The participation of UBS in the financial consortium which assisted in the placement of EDF shares on the French market similarly created no community of interest between UBS and EDF, while the fact that UBS listed EDF as a good investment opportunity is too remote a connection to give rise to a conflict of interest. None of the findings in the Disqualification Decision on these points are ones which it could plausibly be said that no reasonable tribunal would have made.
162.
The fact that the UBS Foundation held shares in EDF, as the Tribunal remarked, "stands on a somewhat different footing". Nevertheless, the Committee considers that, as Professors Park and Remón held, the fact that the ultimate beneficiary of any rise in the value of those shares would be the Swiss funds which participated in the Foundation and not UBS itself, the relative insignificance of the investment when seen in the context of the overall size of UBS's investments and the fact that Professor Kaufmann-Kohler had no responsibility for, or involvement in, the management of this or other investments were grounds on which any reasonable decision-maker could, and would be likely to, conclude that there was no basis for holding that Professor Kaufmann-Kohler manifestly lacked the requisite independence and impartiality. It is noticeable that at least one other decision-maker, namely the tribunal in Suez II, did indeed reach such a conclusion.
163.
The same is true of the failure by Professor Kaufmann-Kohler to disclose her appointment to the UBS Board. Both Professors Park and Remón in the present case, and Professors Salacuse and Nikken in Suez II, carefully explained why that failure was not sufficient to indicate a lack of independence or impartiality.
164.
The Committee has taken note of the fact that the Vivendi II Committee, though eventually deciding not to annul the award in that case, took a far more critical view of Professor Kaufmann-Kohler's conduct. Nevertheless, the Committee considers that the Vivendi II decision does not cause it to conclude that the Disqualification Decision in the present case was unreasonable. It therefore dismisses the application that the Award should be annulled on account of Professor Kaufmann-Kohler's directorship of UBS or her non-disclosure of that directorship.

3. Professor Remón

169.
Argentina points to the attendance of a partner in Uría Menéndez, acting as Repsol's proxy, at a meeting of the shareholders of YPF on 6 June 2012, that is five days before the Award was given to the Parties. According to the minutes of that meeting,192 that partner made reference to a dispute between Repsol and Argentina. Argentina maintains that the duty of an arbitrator to act independently and impartially does not cease when the award is completed but only when the award is given to the parties. While the Committee agrees that the duty to act independently and impartially continues until the award has been delivered, it does not accept the conclusion which Argentina seeks to draw with regard to the present case. By 6 June 2012, the Award had already been completed and signed by all three members of the Tribunal. While an arbitrator remains obliged to act independently and impartially up to the moment that the award is delivered, once that arbitrator has signed the award there is normally no further occasion for the arbitrator to act in relation to the arbitration proceedings; certainly there is no evidence before the Committee that Professor Remón was called upon to perform any act as arbitrator after he had appended his signature to the Award on 14 May 2012.
171.
Nevertheless, there is one further matter to consider. Argentina points to the fact that Repsol's Notice of Arbitration referred not just to formal expropriation but also to other steps taken before the announcement of 16 April 2012 and going back to the last weeks of 2011. Since Uría Menéndez was, according to Professor Remón's letter of 18 April 2012, one of the firms which "traditionally provided legal advisory services to Repsol", it should be inferred that they were already engaged in advising Repsol regarding its relations with Argentina and the legal strategy it should adopt as early as November 2011.193
172.
The Claimants counter that this is pure speculation and that, even if it were well-founded, since Argentina knew what it intended to do vis-à-vis Repsol, it must be taken to have waived any objection to Professor Remón as regards any conflict of interest arising out of events in late 2011 or early 2012.
173.
The Committee does not accept the Claimants' waiver argument. That argument would have been well-founded had Uría Menéndez been representing Repsol in court or arbitration proceedings in the period November 2011 to March 2012, since Argentina would have been aware of the firm's involvement in proceedings against Argentina. The same cannot be said, however, regarding any advisory role that Uría Menéndez might have had. There is no reason to assume that Argentina would have known which law firm, if any, was advising Repsol regarding its relations with Argentina in that period, unless that firm was openly engaged in correspondence or meetings and there is no evidence to suggest that that was the case.
174.
Nevertheless, the Committee agrees with the Claimants that Argentina's argument about the role that Uría Menéndez may have played before the announcement of 16 April 2012 is purely speculative. No evidence whatever has been put before the Committee that would enable it to conclude that Uría Menéndez was advising Repsol regarding a legal strategy vis-à-vis Argentina during that period. The Committee agrees with the observation of the SGS Tribunal quoted at paragraph 110, above, and, in particular, with that tribunal's comment that

"an arbitrator cannot, under Article 57 of the Convention, be successfully challenged as a result of inferences which themselves rest merely on other inferences".194

175.
Accordingly, the Committee also dismisses Argentina's application to annul the Award on the ground of a supposed lack of independence and impartiality on the part of Professor Remón.

V. Applicable Law Issues

A. Introduction

176.
Argentina maintains that, in deciding on the applicable law, the Tribunal manifestly exceeded its powers (ICSID Article 52(1)(b)), failed to state the reasons on which the Award was based (ICSID Article 52(1)(e)) and was guilty of a serious departure from a fundamental rule of procedure (ICSID Article 52(1)(d)).195
177.
These allegations concern three aspects of the Award. The first concerns the decision of the Tribunal that the "Claimants' claims may be decided solely on the basis of the Argentina-France BIT",196 thereby excluding application of the Argentina-Luxembourg BIT. The second concerns the failure of the Tribunal to apply Argentine law, which Argentina had argued was "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".197 In addressing that argument, the Tribunal concluded that -

... in the context of its mandate under the Argentine-France BIT, the terms of that treaty provide the lodestar for decision. It may well be that a national court deciding analogous issues would come to a different conclusion. However, in the present dispute the BIT supplies the primary foundation and framework for the Tribunal's consideration of investor protection.198

The third aspect of the Award challenged under this heading is the Tribunal's conclusion that, in its Jurisdictional Decision, it had "laid down no general requirement of discrimination as a basis for liability under relevant treaty provisions".199

B. Parties' Arguments

1. Argentina

178.
Argentina maintains that it is now well-established that one form of manifest excess of powers is the failure of a tribunal to apply the applicable law200 and that the Tribunal so failed in three respects. First, it held that León's claim was governed by the Argentina-France BIT, rather than the Argentina-Luxembourg BIT, notwithstanding that León was a Luxembourg corporation. Secondly, it failed to apply Argentine law in breach of a clear directive in the BITs. Argentina also maintains that the Tribunal failed to state reasons for this aspect of its decision.
179.
Argentina contends that León, which remained a Claimant throughout the proceedings and thus benefits from the Award, could not have had standing to claim under the Argentina-France BIT, because it was at all times a Luxembourg corporation. To apply the Argentina-France BIT to León's claims was, therefore, a manifest excess of power. According to Argentina, it was also contrary to the approach taken in the Jurisdiction Decision, where the Tribunal had found that it possessed jurisdiction over León's claims under the Argentine-Luxembourg BIT.
180.
In addition to exceeding its powers in this respect, the Tribunal also failed to explain how the Argentina-France BIT could apply to León.201 To the extent that it could be said to have attempted to do so, its reasoning was contradictory in that it referred to León's cession of its rights to EDFI after proceedings had commenced, whereas the Tribunal had made clear in the Jurisdiction Decision that it was the state of affairs at the time of the commencement of proceedings that was decisive.
181.
While the application by the Tribunal of the Argentina-France BIT was one aspect of a manifest excess of powers, the failure to apply the Argentina-Luxembourg BIT to León's claims was another. According to Argentina, it was that treaty which plainly constituted the applicable law in respect of León and the Tribunal's failure to apply it deprived Argentina of the ability to rely on the "public order" defence afforded by Article 3(2) of the Argentine-Luxembourg BIT, which the Tribunal expressly recognized might have made a difference to the outcome of the case.202 Again, this decision entailed not just a manifest excess of powers but also a failure to state reasons. In particular, Argentina refers to what it characterizes as contradictions between different parts of the Award and between the Award and the Jurisdiction Decision.
182.
As a distinct ground for annulment, Argentina challenges the Tribunal's decision that the case was to be decided by reference only to the Argentina-France BIT and international law and not to apply the law of Argentina. According to Argentina, this approach ignored the provisions of Article 42(1) of the Convention which requires a tribunal - in the absence of agreement by the parties - to "apply the law of the Contracting State (including its rules on the conflict of laws) and such rules of international law as may be applicable". The result was that the Tribunal failed to apply Argentine law as the law governing the Concession Agreement and, more fundamentally, disregarded the extensive powers which the Constitution of Argentina gave to the government to deal with emergencies such as that of 2001-02. The Tribunal had also failed to state its reasons since it referred only to the principle of international law that, in the event of a conflict, international law prevails over national law without giving any indication of what conflict it considered to exist between international law and the law of Argentina.
183.
Finally, Argentina refers to what it terms a contradiction between the Jurisdiction Decision and the Award with regard to the issue of discrimination. According to Argentina, in the Jurisdiction Decision, the Tribunal held that the Claimants would have to prove discrimination in order to establish a case of breach of either BIT. In the Award, however, it repudiated that finding and held that discrimination was not a requirement for the establishment of a breach of the fair and equitable treatment standard or certain other provisions of the treaties. Argentina again characterises this decision as a manifest excess of power and argues that the Tribunal failed to give a coherent and non-contradictory statement of its reasons, as well as departing in a serious way from a fundamental rule of procedure.

2. The Claimants

184.
The Claimants reject the suggestion that the Tribunal erred in any annullable fashion in relation to the applicable law. They maintain that Argentina invokes three separate paragraphs of Article 52(1) but treats them as largely indistinguishable. According to the Claimants, even though an application for annulment may raise more than one paragraph of Article 52(1), each is a separate ground for annulment which must be independently established.203 In particular, the Claimants maintain that Argentina has not properly pleaded, let alone substantiated, its argument that the Tribunal departed in a serious way from a fundamental rule of procedure.204 Moreover, according to the Claimants, Argentina's arguments fail to distinguish between a failure to apply the applicable law and misapplication of that law, as well as ignoring the limitations placed on annulment by the relevant parts of Article 52(1).
185.
While the Claimants accept that Article 52(1)(b) applies to a manifest failure to apply the applicable law, they maintain that it has no application to "incorrect" application, departure from the view taken by other tribunals regarding the same or a similar issue, or failure to cite any text to support a proposition that it considers to derive from the treaty.205
186.
The Claimants argue that León was added as a claimant in the Amended Request only because Crédit Lyonnais, its French parent company, had transferred to León its shares in MENDINVERT. The Amended Request invoked the Argentina-France BIT and only pleaded the Argentina-Luxembourg BIT as a fallback position to be relied upon in the event that the Tribunal were to decide that León could not rely upon the Argentina-France BIT.206
187.
With regard to the non-application of Argentine law, the Claimants maintain that the claims were for violation of the Argentina-France BIT and were therefore necessarily to be decided in accordance with the terms of that treaty and the principles of international law. The Tribunal had carefully analysed and explained its decision not to apply Argentine law.
188.
On the issue of discrimination, the Claimants maintain that Argentina misrepresents the Jurisdiction Decision and submit that the Award clearly explained that the Jurisdiction Decision was not laying down a general requirement of discrimination.
189.
Finally, the Claimants contend that Argentina's claim that there was a serious departure from a fundamental rule of procedure is misconceived. There was no indication "what aspect of Argentina's right of defense was impaired".207 Indeed, the whole issue of applicable law was extensively briefed by both Parties.208

C. The Decision of the Committee

1. The Legal Framework

190.
Before turning to the detail of this particular head of Argentina's Application for annulment of the Award, it is necessary first to make some observations regarding the three paragraphs of Article 52(1) of the ICSID Convention invoked by Argentina, although there appeared to be little if any difference between the Parties regarding the requirements of each paragraph (as opposed to their application to the facts of the present case).

a. Manifest excess of powers (Article 52(1)(b) of the Convention)

b. Failure to state reasons (Article 52(1)(e) of the Convention)

194.
The provision of Article 52(1)(e) that an award may be annulled if it "fails to state the reasons on which it is based" is closely tied to the provision of Article 48(3), which requires that "the award shall deal with every question submitted to the Tribunal, and shall state the reasons upon which it is based".
195.
The requirement to state reasons is an important one but it is equally important that an ad hoc committee is not drawn into using Article 52(1)(e) as a means for conducting an appeal. Article 52(1)(e) empowers a committee to annul an award if there has been a failure to state the reasons on which the award is based; it does not entitle a committee to annul an award because it finds the reasoning unconvincing. The point was very clearly made by the Vivendi I Committee in the following passage -

A greater source of concern is perhaps the ground of "failure to state reasons", which is not qualified by any such phrase as "manifestly" or "serious". However, it is well accepted both in the cases and the literature that Article 52(1)(e) concerns a failure to state any reasons with respect to all or part of an award, not the failure to state correct or convincing reasons. It bears repeating that an ad hoc committee is not a court of appeal. Provided that the reasons given by a tribunal can be followed and relate to the issues that were before the tribunal, their correctness is beside the point in terms of Article 52(1)(e). Moreover, reasons may be stated succinctly or at length, and different legal traditions differ in their modes of expressing reasons. Tribunals must be allowed a degree of discretion as to the way in which they express their reasoning.

In the Committee's view, annulment under Article 52(1)(e) should only occur in a clear case. This entails two conditions: first, the failure to state reasons must leave the decision on a particular point essentially lacking in any expressed rationale; and second, that point must itself be necessary to the tribunal's decision. It is frequently said that contradictory reasons cancel each other out, and indeed, if reasons are genuinely contradictory so they might. However, tribunals must often struggle to balance conflicting considerations, and an ad hoc committee should be careful not to discern contradiction when what is actually expressed in a tribunal's reasons could more truly be said to be but a reflection of such conflicting considerations.215

196.
Similarly, the Wena committee explained that -

The ground for annulment of Article 52(1)(e) does not allow any review of the challenged award which would lead the ad hoc committee to reconsider whether the reasons underlying the tribunal's decisions were appropriate or not, convincing or not. As stated by the ad hoc committee in MINE, this ground for annulment refers to a "minimum requirement" only. This requirement is based on the tribunal's duty to identify, and to let the parties know, the factual and legal premises leading the tribunal to its decision. If such a sequence of reasons has been given by the tribunal, there is no room left for a request for annulment under Article 52(1)(e).

Neither Article 48(3) nor Article 52(1)(e) specify the manner in which the Tribunal's reasons are to be stated. The object of both provisions is to ensure that the parties will be able to understand the tribunal's reasoning. This goal does not require that each reason be stated expressly. The tribunal's reasons may be implicit in the consideration and conclusions contained in the award, provided they can be reasonably inferred from the terms used in the decision.216

197.
A tribunal is required to answer each "question" put to it and must therefore give sufficient reasons to meet the "minimum requirement" referred to by the Wena committee in respect of each question. It is not, however, required to deal explicitly with every detail of every argument advanced by the parties or to refer to every authority which they invoke. As the Enron committee explained -

... a tribunal has a duty to deal with each of the questions (" pretensions ") submitted to it, but it is not required to comment on all arguments of the parties in relation to each of those questions. Similarly, the Committee considers that the tribunal is required only to give reasons for its decision in respect of each of the questions. This requires the tribunal to state its pertinent findings of fact, its pertinent findings as to the applicable legal principles, and its conclusions in respect of the application of the law to the facts. If the tribunal has done this, the award will not be annulled on the basis that the tribunal could have given more detailed reasons and analysis for its findings of fact or law, or that the tribunal did not expressly state its evaluation in respect of each individual item of evidence or each individual legal authority or legal provision relied on by the parties, or did not expressly state a view on every single legal and factual issue raised by the parties in the course of the proceedings. The tribunal is required to state reasons for its decision, but not necessarily reasons for its reasons.217

198.
The Committee agrees with these observations regarding the scope and purpose of Article 52(1)(e). Nevertheless, it remains an important part of the annulment process and, as the decision of the ad hoc committee in CMS demonstrates, where a tribunal has failed to give reasons which enable the parties to understand the decision on a question before it, that part of its award is liable to annulment.218

c. Serious departure from a fundamental rule of procedure (Article 52(1)(d))

2. Application of the Argentina-France BIT and Non-Application of the Argentine-Luxembourg BIT

201.
In its Award, the Tribunal noted that "the Parties are for the most part in accord that this case can and should be decided solely on the basis of the Argentine-France BIT".221 It went on, however, to observe that an important exception lay in Argentina'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".222

202.
The Tribunal held, however, that the entire case fell to be decided under the Argentina-France BIT and that it was not necessary to apply the Argentina-Luxembourg BIT.223 Article 3(2) of the latter treaty thus became irrelevant to the decision, although the Tribunal noted that -

Had the Tribunal decided to grant relief on the basis of Article 3(2) of the Argentina-Luxembourg BIT, then the "public order" defense of that provision might have had consequences. Such is not the case, however.224

203.
In its Application, and in the written pleadings, Argentina complains of the failure to apply the Argentina-Luxembourg BIT.225 At the oral hearings, however, while maintaining that complaint, Argentina added an argument that the Tribunal committed a manifest excess of power in deciding that the Argentina-France BIT applied to León's claims; since León was a Luxembourg company, Argentina argues, there was no basis on which its claim could fall within that treaty.226
204.
The Claimants maintain that it was not open to Argentina to challenge the Award on this basis at so late a stage in the proceedings.227 The Committee does not agree. While it is a matter for regret that the issue was not more clearly pleaded, the Committee considers that the complaint about the application of the Argentina-France BIT is merely the other side of the coin from the complaint about the failure to apply the Argentina-Luxembourg BIT to León's claims. The issue was therefore raised in a timely fashion.228
205.
The Claimants also argue that the position of León was irrelevant, because in 2005, long before the date of the Award or even of the pleadings on the merits, León's interests in SODEMSA had been transferred to IADESA and its right to maintain the ICSID claim to EDFI, so that, by the time of the hearings on the merits, EDFI owned the rights to the entire ICSID claim.229 On that basis, the Claimants argue that "the Tribunal reached the logical conclusion that it didn't need to apply the Luxembourg BIT because there was nothing there to apply it to".230 Argentina counters that León remained a claimant throughout the proceedings, that the dispositif granted relief, including the declaratory relief in its first paragraph, to "the Claimants" without distinguishing between them and that the Jurisdiction Decision had ruled that the critical date was that of the request for arbitration, which was why León and SAURI had remained claimants.231
206.
In order to analyse this argument, it is necessary to recall the history of the Claimants' involvement in EDEMSA. In July 1998, when the Government of Mendoza concluded with EDEMSA the Concession Agreement which was at the heart of the case before the Tribunal, 51% of the shares in EDEMSA were purchased by a consortium of EDFI, SAURI and Crédit Lyonnais (all of which are, and were then, French companies) and Argentine co-investors. That shareholding was held by SODEMSA, a company incorporated in Argentina. EDFI held 45% of the shares in SODEMSA and SAURI 15%. The remaining 40% were held by another Argentine company, MENDINVERT. Crédit Lyonnais held a 70% shareholding in MENDINVERT with the remaining 30% being held by Argentine investors. Crédit Lyonnais subsequently transferred its shareholding in MENDINVERT to León, a company incorporated in Luxembourg that was wholly owned by Crédit Lyonnais. That was how matters stood at the time the Amended Request for Arbitration was filed on 4 August 2003. The Amended Request sought to add Léon as a claimant to the proceedings already instituted by EDFI and SAURI on 16 June 2003. The Tribunal noted that:

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 the provisions of the [Argentina-Luxembourg BIT].232

207.
In 2004 León became a wholly-owned subsidiary of EDFI.233 Subsequently León sold its shares in MENDINVERT to an Argentine company, IADESA, but transferred its right to the present ICSID claim to EDFI.234 At the same time, EDFI, which had earlier acquired SAURI's shares in SODEMSA, sold its entire shareholding in SODEMSA to IADESA, while retaining the right to the ICSID claims.235
208.
In its Jurisdiction Decision, the Tribunal held that "as a general matter, the date when proceedings are instituted serves as the relevant time to establish jurisdiction"236 and cited both arbitral and International Court of Justice authority to that effect. Accordingly, the Tribunal concluded that, notwithstanding the transfers in 2004, SAURI and León should remain claimants.237 Nevertheless, it added that "whether SAURI and León still have substantive rights is a different issue, which the Tribunal will need to review together with the merits".238
209.
When addressing the merits in its Award, the Tribunal held:

884. The Tribunal notes that Claimants do not base their substantive request for relief on the Argentina-Luxembourg BIT, except to the extent of provisions that might be incorporated by reason of the Most Favored Nation clause in the Argentina-France BIT. See Claimants' Post-Hearing Brief on the Merits at paragraph 59.

885. While Claimants did invoke the Argentina-Luxembourg BIT in their Request for Arbitration, as well as certain subsequent pleadings, they did so only insofar as that BIT might have been relevant to claims by León. Claimant [sic] further noted that the relevant interests were held at the outset entirely by French companies.

886. At present, French investors again own all of the shares considered by the Tribunal in its findings of liability and quantum, including any which for a time were owned by León. Crédit Lyonnais (incorporated in France) was the initial owner of the relevant shares which were subsequently transferred to León, its wholly-owned subsidiary. Ultimately, those shares were acquired by EDFI, a French investor which now possesses all relevant rights. See Claimants' PostHearing Brief on the Merits, paragraphs 59-60.

887. Accordingly, Claimants' claims may be decided solely on the basis of the Argentina-France BIT.239

210.
There is no doubt that this passage demonstrates that the Tribunal considered that the real claim which it had to consider was that of EDFI which, by the time of the Award, possessed all relevant rights to the ICSID claims. The Committee sees no contradiction between that recognition and the finding, in the Jurisdiction Decision, that the critical date for purposes of ascertaining jurisdiction was the date on which the arbitration proceedings were commenced. As the Tribunal made clear in its Jurisdiction Decision, the issue of jurisdiction is separate from the question what, if any, substantive rights each Claimant possessed.240 Nevertheless, while the Tribunal quite rightly focussed on the position of EDFI, the Committee does not accept the Claimants' contention that the position of León (and by implication also of SAURI, though no challenge has been made in respect of this company) became irrelevant. León and SAURI remained Claimants and the relief granted in the dispositif was granted to "Claimants" without any distinction between them. While León might be unable to enforce the award of damages given that it has assigned its rights to EDFI, all three Claimants may be said to have the benefit of the declaratory relief granted in paragraph I of the dispositif, which records the Tribunal's decision that -

Respondent has breached its obligations to (i) respect specific commitments undertaken in connection with Claimants' investment and (ii) afford Claimants Fair and Equitable Treatment with respect to their investment.

The Committee is not persuaded by the Claimants' argument that this paragraph was not declaratory relief but "really just articulation of the conclusion by the Tribunal that Argentina had violated the BIT" and that "it didn't actually confer any relief as such".241 The form of the paragraph and its place in the dispositif means that it cannot be dismissed so readily. Moreover, the Claimants' Reply on the Merits in the proceedings before the Tribunal had concluded with a section entitled "Claimants' Request for Relief" which expressly requested that the Tribunal make the determination which appeared at paragraph I of the dispositif242 and the Award duly recited that request.243

211.
The question, therefore, is whether, in the light of its earlier ruling on jurisdiction, the Tribunal manifestly exceeded its powers by holding that León possessed rights under the Argentina-France BIT. In the Committee's view the Tribunal did not do so.
212.
It is necessary to recall that at all relevant times León was wholly owned by a company with its seat in France - initially Crédit Lyonnais and, later, EDFI. It held its investment in Argentina (the shares in MENDINVERT which in turn held shares in SODEMSA, which in turn held shares in EDEMSA) by virtue of an assignment from its then parent company, Crédit Lyonnais, and later assigned its rights to the ICSID claims to EDFI. In other words, this was an essentially French investment, ultimate ownership and control of which rested at all times with a French company. It would be an unduly formalistic approach to hold that, in these circumstances, the claim fell outside the scope of the Argentina-France BIT unless the terms of that treaty compelled such a decision. The Committee does not consider that they do so.
213.
On the contrary, the Committee notes that standing to claim under the Argentina-France BIT is governed by Article 8(1) of the BIT which covers "any dispute concerning investments in the terms of this Agreement between one Contracting Party and an investor of the other Contracting Party " (emphasis added). The term "investor" is defined by Article 1(2) of the BIT, paragraph (c) of which provides, in relevant part, that:

The term "investors" means:

c) artificial persons effectively controlled directly or indirectly by... artificial persons having their seat in the territory of either of the Contracting Parties and constituted in accordance with its legislation.

The Committee considers that this provision encompasses León, because it was effectively controlled at the time of the Amended Request by Crédit Lyonnais and subsequently by EDFI, both of which were companies constituted under the law of France and having their seats in France.

214.
In these circumstances, the Committee considers that the Tribunal's decision that León's claims fell within the ambit of the Argentina-France BIT cannot be considered to involve a manifest excess of power. Since, as the Committee has already explained - and as is clear from Argentina's own submissions - the Tribunal's decision not to apply the Argentina-Luxembourg BIT is just the other side of the coin of its decision to apply the Argentina-France BIT, the Committee also concludes that that decision involved no manifest excess of powers.
215.
The Committee does not accept that the Tribunal failed to state the reasons for its decision on the application of one BIT and the non-application of the other. The Tribunal made clear, first, that the claim was brought under the Argentina-France BIT with reliance being placed on the Argentina-Luxembourg BIT only as an alternative.244 It traced carefully the ownership of León and its position vis-à-vis the other Claimants.245 Its reasoning shows that its conclusion that the only BIT to be applied was that between Argentina and France was based upon the fact that the investment was originally held entirely by French companies and that León was involved only by virtue of a transfer from its parent company by which it continued to be owned and controlled, and that, by the time of the hearing, the relevant rights were held entirely by EDFI. The Committee considers that this reasoning is sufficient to enable the reader to follow the logic behind this aspect of the Award.
216.
Nor is the Committee persuaded by Argentina's argument that the Tribunal contradicted itself. The Committee sees no contradiction between the references to the Argentina-Luxembourg BIT in the Jurisdiction Decision and the conclusion in the Award that the law applicable to the substantive issues was that contained in the Argentina-France BIT. The fact that, even after concluding that the case fell to be determined by reference to the latter treaty, the Tribunal continued to refer to the interpretation of the Argentina-Luxembourg BIT246 is explained by the fact that the Claimants were invoking the umbrella clause in that treaty. But they did so by relying upon the MFN Clause in the Argentina-France BIT and it was on that BIT that they based their claim. As for the supposed conflict between paras. 886 and 1099 of the Award, to which Argentina referred at the hearing,247 the Committee can discern no such contradiction. The two paragraphs are dealing with different matters: the first shows that EDFI ultimately acquired all of León's rights to the ICSID claim, while the latter makes clear that León and EDFI did not transfer the rights to the ICSID claim when they sold their shares in MENDINVERT and SODEMSA respectively to IADESA.
217.
Finally, the Committee does not accept Argentina's argument that there was a serious departure from a fundamental rule of procedure in respect of this issue. Although such a departure was alleged in the Application and the Memorial, it was not seriously developed until a brief passage in paragraphs 98-99 of the Reply, where Argentina alleged that the "decision to depart from the critical date in the Decision on Jurisdiction and not to apply the Argentina-Luxembourg BIT impaired due process". That impairment is said to result from the fact that Argentina was denied a defence (under Article 3(2) of the Argentina-Luxembourg BIT) that might have affected the quantum of damages. That, however, is not really an argument about due process but about the substance of the Tribunal's decision. Argentina considers that the Tribunal's decision on applicable law was wrong but that does not make it an abuse of process. There is no evidence that the matter was not fully argued or that Argentina was in any way denied the opportunity to put its case. Consequently, there is no ground for annulment under Article 52(1)(d).

3. Non-Application of Argentine Law

218.
Argentina also challenges what it characterises as the failure of the Tribunal to apply the law of Argentina and its failure to state its reasons for so doing. In this context it is important to recall the provisions of the ICSID Convention and the BIT on applicable law. Article 42(1) of the ICSID Convention provides -

The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be available.248

Article 8(4) of the Argentine-France BIT 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 the 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.

The authentic texts are as follows -

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 au 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.

and

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.

While the English translation may be a little inelegant (e.g. in using "laws", rather than "law" as the translation of "droit" and "derecho"), in substance there is no difference between these texts.

219.
Article 8(4) of the BIT constitutes the agreement between the Parties regarding the applicable law, since the BIT constitutes the text of the arbitration agreement.249 The applicable law thus consists of the text of the BIT itself, the law of Argentina and the principles of international law, as well as the terms of any relevant special agreement, such as the Concession Agreement. However, the fact that a particular legal system supplies part of the applicable law does not mean that that law governs a given issue in dispute between the Parties. Which of the various applicable laws determines the answer to any particular question will depend upon the nature of that question. Thus, the interpretation and application of the Concession Agreement clearly fall to be determined by reference to Argentine law as the proper law of that contract. By contrast, if the issue to be determined concerns the interpretation or application of the BIT, those are questions governed by international law.
220.
It is in that light that the Tribunal's findings that "in the context of its mandate under the Argentine-France BIT, the terms of that treaty provide the lodestar for decision" and that "in the present dispute, the BIT supplies the primary foundation and framework for the Tribunal's consideration of investor protection"250 are to be understood. The issues before the Tribunal concerned allegations of breaches of the BIT. Those issues could only be resolved by reference to the terms of the BIT and the principles of international law on subjects such as treaty interpretation. Before the Tribunal Argentina had argued that Argentine law conferred broad powers for addressing an emergency such as the economic crisis confronting Argentina in 2001-2002. The Tribunal concluded, however, that even if Argentine law would have permitted the various actions taken by the Federal and Mendoza authorities which affected the Claimants' investment, that would not have prevented those actions from constituting a breach of the BIT. That conclusion followed from the principle of international law, reflected in Article 27 of the Vienna Convention on the Law of Treaties 1969 and Article 3 of The International Law Commission Articles on State Responsibility, that a State cannot rely upon its internal law to justify a failure to perform its treaty obligations and that the wrongfulness of an act under international law is not affected by the characterisation of that act as lawful by national law.251 There was, therefore, no manifest excess of power in the form of a failure to apply the applicable law. The Tribunal had noted the relevant principles of Argentine law in its Award but its conclusion was that those principles did not affect the specific issues which the Tribunal had to decide because those issues were governed by the terms of the BIT interpreted and applied in the light of the relevant principles of international law. That conclusion is amply supported by authority252 and appears to the Committee irreproachable as a matter of logic.
221.
Nor is the Committee persuaded that the Tribunal failed adequately to state the reasons for this conclusion. Argentina argues that the Tribunal referred to the primacy of international law in the event of a conflict between Argentine law and international law without anywhere indicating what conflict existed. However, the Tribunal's reasoning is quite clear. The Tribunal considered that whatever Argentine law provided would make no difference to the outcome on the issues before the Tribunal: if Argentine law pointed to the same outcome as international law, then it plainly made no difference, and if it pointed to a different outcome then international law prevailed. That reasoning plainly did not convince Argentina but Article 52(1)(e) does not permit annulment on the ground that a tribunal's reasoning appears unconvincing. As the Committee has already explained (see paras. 199 to 200, above), the only question is whether "the reasons given by a tribunal can be followed and relate to the issues that were before the tribunal, their correctness is beside the point".253
222.
The Committee cannot discern any basis on which the Tribunal could be said seriously to have departed from any fundamental rule of procedure in respect of this part of its decision.

4. Discrimination

223.
Argentina's final challenge under this heading is to the Tribunal's decision on whether or not the Claimants had to prove discrimination in order to establish the existence of a breach of the BIT.
224.
This challenge is founded upon paragraph 146 of the Jurisdiction Decision, in which the Tribunal stated -

To establish treaty breaches, Claimants must prove that Respondent's enactment and implementation of the Emergency Measures constituted discriminatory behaviour as defined in the French and Luxembourg investment treaties. The Tribunal would need to examine inter alia Respondent's motives and the impact of the Emergency Measures, and whether they constituted an attempt to deprive Claimants of their rights simply because they were foreign investors.

225.
In the Award, the Tribunal dismissed the Claimants' claim that the measures taken violated the prohibition of discrimination.254 However, it rejected Argentina's argument that the passage just quoted from the Jurisdiction Decision laid down a general requirement of discriminatory intent as a pre-requisite to recovery under any of the provisions of the BIT. It is worth quoting the entire passage in the Award in which this issue was addressed. The Tribunal quoted paragraph 146 of the Jurisdiction Decision (set out above) and continued -

916. When read in context, the quoted language does not require discrimination as a necessary pre-requisite to recovery. Rather, the relevant language addressed Respondent's jurisdictional objection pursuant to Article 25(1) of the ICSID Convention.

917. In that connection, the Tribunal had to consider whether Claimants had demonstrated prima facie that the present dispute bore a direct relationship to their investments. Decision on Jurisdiction of August 5, 2008, at paragraph 142.

918. In finding that such a relationship existed, and for that purpose alone, the Tribunal noted Claimants' allegation about a pattern of discriminatory conduct.

919. The Tribunal went on to say that the Respondent would be given an opportunity to test such contentions, with Claimants bearing the burden of proving the alleged discrimination.

920. The Tribunal laid down no general requirement of discrimination as a basis for liability under relevant treaty provisions, but simply stated that any allegations of treaty breach based on discrimination would need to be proven by Claimants.

226.
The Committee considers that the conclusion reached by the Tribunal is entirely compatible with the terms of the BIT and with the relevant parts of the Jurisdiction Decision. It thus entailed no manifest excess of powers. The reasoning is clear and enables the reader to understand what the Tribunal decided, so that there is no annullable failure to state reasons under Article 52(1)(e) of the ICSID Convention. Nor can the Tribunal see anything which might suggest a serious departure from a fundamental rule of procedure.
227.
Accordingly, the Committee dismisses the application for annulment of the Award on the grounds discussed in this section of the Decision.

VI. Derivative Rights and Umbrella Clause Issues

A. The Relevant Treaty Provisions

B. The Issues raised by Argentina and the Decision of the Committee

a. The MFN Clause and the Umbrella Clauses

(1) Parties' Positions

(2) The Decision of the Committee

b. Derivative Rights

(1) Parties' Positions

(2) The Decision of the Committee

c. Privity of Contract

(1) Parties' Positions

(2) The Decision of the Committee

VII. Necessity Issue

A. The Issues Raised by Argentina

281.
The next argument raised by Argentina concerns the Tribunal's treatment of three "affirmative defences" advanced by Argentina, each of which concerned the effects of the economic emergency which arose in Argentina and to which the Committee has already referred.305 Argentina complains of:-

(1) the Tribunal's failure to apply Article 3(2) of the Argentina-Luxembourg BIT306 which the Tribunal acknowledged "might have had consequences"307 had the Tribunal found the Argentina-Luxembourg BIT applicable;

(2) the Tribunal's failure to apply Article 5(3) of the Argentina-France BIT,308 which Argentina maintains afforded it a defence; and

(3) the Tribunal's handling of Argentina's defence based upon customary international law principles regarding the state of necessity.

282.
The Committee has already held (see paragraphs 201 to 217, above) that the Tribunal committed no annullable error in deciding that the case fell to be determined by reference to the Argentina-France BIT and that the Argentina-Luxembourg BIT was inapplicable. It is not, therefore, necessary to address in this part of the Decision the first point raised by Argentina. Accordingly, the Committee will here confine itself to the second and third points set out in the preceding paragraph.

B. Parties' Arguments

1. Argentina

283.
According to Argentina, because the measures which were the subject of the Claimants' main case were taken in response to the national emergency which confronted Argentina, the Tribunal should have applied Article 5(3) of the Argentina-France BIT, the English translation of which provides:

Investors of one Contracting Party whose investments have suffered losses owing to war or any other armed conflict, revolution, state of national emergency, or rebellion occurring in the territory or in the maritime zone of the other Contracting Party shall be accorded by the latter Contracting Party treatment no less favourable than that granted to its own investors or to those of the most favoured Nation.

Although there appears to be no ground for criticism of this translation, the importance of the provision makes it useful also to quote the official French and Spanish texts of Article 5(3), which provide:

Les investisseurs de l'une des Parties contractantes dont les investissements auront subi des pertes dues à la guerre ou à tout autre conflit armé, révolution, état d'urgence nationale ou révolte survenu sur le territoire ou dans la zone maritime de l'autre Partie contractante, bénéficient, de la parte de cette dernière, d'un traitement non moins favourable que celui accordé à ses propres investisseurs ou à ceux de la nation la plus favorisée.

and

Los inversores de una Parte Contratante cuyas inversiones hubiesen sufrido pérdidas a causa de una guerra o de cualquier otro conflicto armado, revolución, estado de emergencia nacional o rebelión ocurrido en el territorio o en la zona marítima de la otra Parte Contratante, recibirán de esta última un tratamiento no menos favorable que el acordado a sus propios inversores o a los de la Nación más favorable.

284.
Argentina maintains that the situation which it faced was a "national emergency" ("estado de emergencia nacional") within the meaning of this provision and that, consequently, in taking measures to address that emergency, Argentina's only obligation to the Claimants was one of non-discrimination.309 In other words, the effect of Article 5(3) was that measures taken to address a national emergency were not subject to the obligations of fair and equitable treatment, full protection and security and the prohibition of expropriation set out in Article 5(1) and (2), or to any obligation arising out of an umbrella clause in another BIT which might have been given effect by virtue of Article 4 of the Argentina-France BIT. That was the analysis arrived at in respect of a provision substantially identical to Article 5(3) by the tribunal in L.E.S.I. S.p.A. and Astaldi S.p.A. v. Algeria.310 The Tribunal, however, rejected Argentina's argument, holding that -

The plain language of Article 5(3) makes clear that it serves as a nondiscrimination provision, not a shield against host State liability for treaty violation.311

285.
Argentina maintains that this decision renders Article 5(3) superfluous, because the Claimants were already entitled to non-discrimination by virtue of the provisions of Article 4 of the BIT.312 Argentina maintains that it had put that argument to the Tribunal, which had failed to address it in the Award. The Tribunal had failed to explain why Article 5(3) was not applicable and had not dealt with the authorities relied upon by Argentina.313 Moreover, the Tribunal had contradicted itself by saying that, while Article 5(3) did not operate to exempt Argentina from liability in respect of non-discriminatory measures taken to address the national emergency, that provision nevertheless had to be understood against the background of customary international law rules on State responsibility in times of war or national emergency,314 even though the Claimants' own expert315 had accepted that those rules provided for a degree of exemption from liability.316
286.
Furthermore, Argentina maintains that the Tribunal distorted its argument by saying that Argentina had likened Article 5(3) of the Argentina-France BIT to Article XI of the Argentina-USA BIT.317 Article XI provides that:

This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the Protection of its own essential security interests.

This provision was at the heart of the awards in Continental Casualty Company v. Argentine Republic318 and LG&E v. Argentine Republic,319 in which tribunals assessing Argentina's emergency measures against the yardstick of the Argentina-USA BIT held that Argentina was relieved of its liability in respect of those measures by virtue of the provisions of Article XI. The Tribunal in the present case held that "the substance of Article 5(3) bears no resemblance to Article XI of the Argentina-US BIT".320 Argentina maintains, however, that it did not argue that Article 5(3) and Article XI were analogous but referred to the Continental Casualty and LG&E awards in order to draw similarities with the factual assumptions analysed in those cases.321

287.
Argentina similarly criticises the Tribunal's approach to necessity under customary international law. The Tribunal held that customary international law recognized the state of necessity as a circumstance precluding wrongfulness. In applying this aspect of customary international law, it relied upon Article 25 of the International Law Commission ("ILC") Articles on State Responsibility. Article 25 provides:

(1) Necessity may not be invoked by a State as a ground for precluding the wrongfulness of an act not in conformity with an international obligation of that State unless the act:

(a) is the only means for the State to safeguard an essential interest against a grave and imminent peril; and

(b) does not seriously impair an essential interest of the State or States towards which the obligation exists, or of the international community as a whole.

(2) In any case, necessity may not be invoked by a State as a ground for precluding wrongfulness if:

(a) the international obligation in question excludes the possibility of invoking necessity; or

(b) the State has contributed to the situation of necessity.

The Tribunal noted that the question how far the provisions of Article 25 codified customary international law was a subject of debate322 but considered it did not need to enter into that debate, because

... both sides in this arbitration stipulate that the Tribunal's analysis should take as applicable legal norms the State of Necessity defense presented by the contours articulated in ILC Article 25. Neither side has argued for application of a standard more favorable to host states than the norms of Article 25.323

288.
The Tribunal concluded that Argentina's conduct fell outside the scope of the defence of necessity on three grounds, First, it was "not convinced that those measures, as presented and explained in these proceedings, were the only means by which [Argentina] could have protected its public interests".324 Secondly, and "equally as important" according to the Tribunal, it had "difficulty finding that [Argentina] did not contribute to the situation which produced the 2001 crisis".325 Lastly, the Tribunal considered that even if Argentina's conduct could have been justified under the state of necessity, Argentina was nevertheless obliged to return to the status quo once that became possible and that Argentina had failed to do so.326
289.
Argentina maintains that the Tribunal distorted its position. While Argentina had referred to Article 25, it denies it had accepted that Article 25 codified the customary international law on the state of necessity. The Tribunal had therefore not been justified in proceeding to deal with Argentina's customary international law defence on the basis of Article 25 without explaining why that provision was authoritative, or in applying its provisions as though it was a treaty.327
290.
Argentina also criticises the Tribunal's application of the necessity standard. Invoking the decision of the ad hoc committee in Enron v. Argentine Republic,328 Argentina maintains that the Tribunal failed to identify the legal standard to be applied in order to determine whether the emergency measures were the "only means" by which Argentina could safeguard its essential interests, failed to evaluate the evidence submitted by Argentina and failed to state reasons for its decisions. In particular, it did not set out the alternative measures which it considers could have been adopted.329 With regard to the requirement of "noncontribution", Argentina again argues that the Tribunal failed to identify the legal standard to be applied and did not properly explain its reasons. It maintains that the Tribunal wrongly considered, on the basis of an expert report tendered by Argentina, that Argentina had accepted that it was partly to blame for the crisis and should not have placed so much weight on a statement by the then President of Argentina in early 2002, regarding which counsel for Argentina referred to "the relatively low weight that politicians' words have".330
291.
Lastly, Argentina maintains that the Tribunal invented a new exception to the defence of necessity, over and above those in Article 25, when it held that even if there had been a state of necessity, Argentina was under a duty to re-establish the status quo, once the emergency had passed.331
292.
In summary, with regard to both Article 5(3) and customary international law, Argentina contends that "the Tribunal not only failed to state the reasons for its decision in this respect but manifestly exceeded its powers in failing to consider the laws it was required to apply and distorting the arguments presented by Argentina, thus departing from a fundamental rule of procedure".332

2. The Claimants

293.
The Claimants counter that the Tribunal committed no annullable error in respect of this part of the case. With regard to Article 5(3) of the Argentina-France BIT, the Claimants argue that the Tribunal was right to conclude, after extensive consideration, that Article 5(3) was a non-discrimination provision and not a charter for dispensing with the protections afforded by other provisions of the BIT.333 The Tribunal did not distort Argentina's argument regarding Article 5(3) and Article XI of the Argentina-USA BIT; on the contrary, it accurately recorded Argentina's position that the Tribunal should apply, mutatis mutandis, the analysis in the Continental Casualty and LG&E, awards which had turned on Article XI.334 Argentina had thus been seeking to persuade the Tribunal to give Article 5(3) the same effect that the tribunals in Continental Casualty and LG&E had accorded to Article XI. The Tribunal had also addressed Argentina's argument that a restrictive interpretation of Article 5(3) would render that provision superfluous given the non-discrimination obligation already inherent in Article 4,335 and rejected it. Lastly, the Claimants contend that, even if this analysis was wrong (which they maintain was not the case), it was not ground for annulment.336
294.
On the customary international law of necessity, the Claimants maintain that Argentina had in fact accepted that Article 25 of the ILC Articles reflected customary international law and had submitted arguments regarding each part of the provisions of Article 25.337 The Claimants deny that the Award is not fully reasoned. They contend that the Tribunal was clear about the standard to be applied and held that "necessity must be construed strictly and objectively, not as an easy escape hatch for host states wishing to avoid treaty obligations which prove difficult".338 With regard to the Enron Committee's decision, they criticise it as containing internal contradictions339 and emphasise that even that decision makes the point that reasons may be implicit.340 According to the Claimants, the Tribunal dealt carefully with the arguments regarding whether the measures adopted by Argentina were the only way of dealing with the crisis and whether Argentina had contributed to the crisis by its own actions. The statement by the President regarding the latter point was only one of the factors taken into account and, in any event, the Committee lacks jurisdiction to re-assess the probative value which the Tribunal accorded to evidence before it.341

C. Committee's Decision

1. The CMS and Enron Decisions

295.
The Committee begins by noting that the issues raised in this part of the case have been the subject of considerable attention from tribunals and ad hoc committees in other cases. In particular, the Parties have referred at some length to the decisions of the ad hoc committees in CMS and Enron, both of which concerned the same Argentine crisis. While there is no concept of binding precedent in ICSID jurisprudence, it is important that the Committee takes note of what other committees have said in respect of the issues which it is now required to consider. The Committee will, therefore, begin with a brief analysis of the CMS and Enron decisions.
296.
The CMS case concerned a claim brought under the Argentina-USA BIT in response to which Argentina raised arguments under Article XI of that treaty and the customary international law of necessity. Those arguments were rejected by the Tribunal and raised again by Argentina in the annulment proceedings in which Argentina alleged that the tribunal had failed to state the reasons for its decision and manifestly exceeded its powers. The CMS Committee rejected the application for annulment on those grounds (although it annulled the award in part on a different ground).
297.
The CMS Committee was critical of what it saw as the tribunal's failure properly to analyse the relationship between Article XI of the BIT and the customary international law on necessity. In the view of the Committee, Article XI of the BIT was a threshold requirement in that, if it applied, the substantive obligations under the rest of the BIT were rendered inapplicable. By contrast, Article 25 of the ILC Articles on State Responsibility provided for an excuse which became applicable only once it was established that there had otherwise been a breach of the obligations under the BIT.342 It considered that the tribunal had failed to understand or explain this relationship and had thereby made an error of law.343 Moreover, by treating necessity and Article XI as existing on the same footing it had made a further error, since if necessity meant that there had not even been a prima facie breach of the treaty, then it occupied the same field as Article XI, which was lex specialis and should have been accorded priority.344 The tribunal's failure to appreciate this relationship also entailed a misinterpretation of Article XI. Nevertheless, while recognizing that these errors "could have had a decisive impact on the operative part of the Award,"345 the CMS Committee held that it was not empowered to annul the award. It summed up the position in the following terms:

The Committee recalls, once more, that it has only a limited jurisdiction under Article 52 of the ICSID Convention. In the circumstances, the Committee cannot simply substitute its own view of the law and its own appreciation of the facts for those of the Tribunal. Notwithstanding the identified errors and lacunas in the Award, it is the case in the end that the Tribunal applied Article XI of the Treaty. Although applying it cryptically and defectively, it applied it. There is accordingly no manifest excess of powers.346

298.
The Committee also declined to annul for failure to state reasons. It was critical of the tribunal's brief explanation of why Article XI was considered inapplicable on the facts347 but held that "although the motivation of the Award could certainly have been clearer, a careful reader can follow the implicit reasoning of the Tribunal".348
299.
The Enron case likewise concerned a claim brought under the Argentine-US BIT. Again the Tribunal had rejected Argentina's arguments based on Articles IV(3) and XI of that BIT and the customary international law of necessity, and again Argentina sought annulment of the award on the grounds of failure to state reasons and manifest excess of powers. Unlike the CMS Committee, however, the Enron Committee annulled the award for manifest excess of powers in relation to the findings on Article XI and the customary international law on necessity, as well as for failure to state reasons.349
300.
The Enron Committee began by noting that both Parties had treated Article 25 of the ILC Articles on State Responsibility as representing the customary international law on necessity and the tribunal had proceeded on that basis. The Enron Committee observed that, even if the Committee had taken a different view of the status of Article 25, "it could not amount to an annullable error for the Tribunal to give an applicable legal rule an interpretation on which both parties were agreed."350
301.
The Enron Committee held, however, that the tribunal's application of the Article 25 criteria was flawed in important respects. First, it considered that the tribunal had failed to "address a number of issues that are essential to the question of whether the ‘only way' requirement was met".351 In this context, the Enron Committee considered that the requirement that the measures taken be, in the words of Article 25, "the only means for the State to safeguard an essential interest against a grave and imminent peril" was open to more than one interpretation and that the tribunal had failed to identify what legal standard was to be applied, whether the relative effectiveness of different measures was a factor to be taken into account and who was to determine whether or not alternative means had actually been open to the State at the relevant time.352 The Committee concluded that -

It is not for the Committee in these annulment proceedings to provide answers to these questions. It was however necessary for the Tribunal, either expressly or sub silentio, to decide or assume the answers in order to apply the ‘only way' provision of Article 25(1)(a) to the facts of the case.353

The Enron Committee considered that the tribunal had placed too much reliance on the report of an economic expert whose view could not be said to have been an analysis of whether other means were open to Argentina as a matter of law. The Enron Committee accepted that the parties had not identified these issues in their pleadings but nevertheless stated that "the Tribunal is required to apply the applicable law, and is required to state sufficient reasons for its decision".354

302.
Secondly, the Enron Committee held that the tribunal in that case had failed to make a clear finding on whether or not the measures taken by Argentina had "seriously impair[ed] an essential interest of the State or States towards which the obligation exists, or of the international community as a whole" and had confused this issue with that of nonjusticiability in a different context.355 The Committee held that -

The Tribunal nowhere states expressly that it finds the requirement in Article 25(1)(b) of the ILC not to be satisfied in this case. The Committee considers it unclear whether the Tribunal ultimately did make such a finding or not. To the extent that the Tribunal did make such a finding, the Committee considers that it is entirely unclear on what basis that finding of law was made.356

303.
Lastly, the Enron Committee considered that the tribunal's finding that Argentina had contributed to the emergency and was therefore precluded by the principle stated in Article 25(2)(b) from relying on the defence of necessity was flawed. The tribunal had failed to address the question what was the legal standard to apply and had again uncritically adopted the findings of the economic expert witness.357
304.
The Enron Committee thus concluded that the tribunal's finding on necessity under customary international law involved a manifest excess of powers (in the form of a failure to apply the applicable law) and a failure to state reasons. Since that finding by the tribunal also laid the foundations for its finding that Argentina could not rely upon Article XI of the Argentina-USA BIT, the Enron Committee also annulled the finding regarding Article XI.358
305.
As has already been explained, the analysis of these issues by the CMS Committee and the Enron Committee are not binding upon the Committee in the present case. The Committee has, however, taken them into account in its own examination of the issues raised concerning Article 5(3) of the Argentina-France BIT and necessity under customary international law.

2. Article 5(3) of the Argentina-France BIT

306.
With the analysis of the CMS Committee in mind, the Committee considers that it must begin with the question whether the Tribunal committed an annullable error in its treatment of Argentina's reliance on Article 5(3) of the Argentina-France BIT (the text of which is set out at para. 283, above).
307.
The Tribunal did not make the mistake for which the CMS Committee criticised the tribunal in that case359 of confusing the application of this provision with the question whether the customary international law of necessity was applicable. On the contrary, the Tribunal began by determining whether or not Article 5(3) meant that Argentina was not prima facie in breach of treaty360 before considering whether, if there was a prima facie breach of treaty, the wrongfulness of the act was precluded by the circumstance of necessity.361
308.
The Tribunal rejected Argentina's proposed interpretation of Article 5(3) as providing that, in the event of an emergency of the kind described in that provision, the host State's only duty towards the investor was one of non-discrimination. It found, instead, that "the plain language of Article 5(3) makes clear that it serves as a non-discrimination provision, not a shield against host state liability for treaty violation".362 It determined that Article 5(3) may best be understood against the background of the rules of customary international law on State responsibility toward foreign investors during periods of war, insurrection and other extraordinary circumstances, which determines host State responsibility toward aliens.363
309.
Contrary to what has been suggested by Argentina, the Committee sees no contradiction between these two paragraphs of the Award. It is important to bear in mind that much of the jurisprudence on customary international law on State responsibility towards aliens during times of war and other emergency was concerned with the obligations of the State to compensate for damage caused by acts which were not attributable to the State itself (e.g., damage done to a foreign investor's property by rioters or insurgents). In general, customary international law did not require compensation in such circumstances.364 The Tribunal's reasoning that "Article 5(3) leaves those customary rules untouched and indeed supplements their content by requiring equality of treatment in response to such circumstances"365 is in no way incompatible with its decision that it does not operate as a "shield against host state liability for treaty violation"366 by disapplying other substantive protections afforded by the BIT.
310.
As the Tribunal pointed out, the contrast with Article XI of the Argentina-USA BIT (the text of which appears at para. 286, above) is striking. The latter provision expressly states that the other provisions of that treaty "shall not preclude the application... of measures necessary for the maintenance of public order". No such language appears in Article 5(3).
311.
Turning to Argentina's contention that the Tribunal distorted its argument regarding Article 5(3), the Committee doubts whether, even if this contention were accepted, such a distortion would amount to a manifest excess of powers, a failure to state reasons or (to the extent that Argentina makes such a case) a serious departure from a fundamental rule of procedure. The Committee does not, however, accept that the Tribunal distorted Argentina's argument. It is true that the Tribunal observed that Argentina "argues that Article 5(3) is analogous to Article XI"367 whereas Argentina had denied an allegation by the Claimants that it sought to assimilate the two provisions.368 Nevertheless, the essence of Argentina's argument before the Tribunal was that Article 5(3) had the same effect as Article XI in that, according to Argentina, in the conditions of emergency described therein, Article 5(3) rendered inapplicable the other provisions of the BIT affording investors substantive protections and replaced them with a significantly more limited obligation of non-discrimination.369 In these circumstances, the Tribunal's analysis that Argentina treated Article 5(3) as "analogous" to Article XI cannot be regarded as a distortion.
312.
The Tribunal's interpretation of Article 5(3) is an entirely plausible one. It accords more naturally with the text of the provision than does that advanced by Argentina. The Committee is not persuaded by Argentina's contextual argument, namely that if Article 5(3) were treated as no more than a non-discrimination provision it would be otiose since Article 4 of the Argentina-France BIT requires each Party to provide to investors of the other Party "treatment no less favourable than that accorded to its own investors". It is by no means unusual for the parties to a treaty to include, ex abundante cautela, a provision which may not be strictly necessary. Indeed, the Argentina-USA BIT includes a provision (Article IV(3))370 which is quite similar to Article 5(3) of the Argentina-France BIT, notwithstanding that it contains not only a general non-discrimination provision but also the more sweeping exclusionary provision of Article XI. The Committee also notes that the Enron tribunal (in a part of the award which was not annulled by the ad hoc committee in that case) reached a very similar interpretation of the comparable provision in the Argentina-USA BIT.
313.
The Committee is aware that the tribunal in L.E.S.I. S.p.A. and Astaldi S.p.A. v. Algeria371 took a different view of the scope of a provision substantially identical to Article 5(3) (a fact noted by the Tribunal372). In an annulment proceeding, however, an ad hoc Committee is not required to choose between two such different interpretations. The question is not whether the Tribunal was correct in its interpretation of Article 5(3) but whether it applied that provision. In the words of the Enron Committee -

It may well be that different interpretations of this provision are possible. However,... it is not for the Committee to determine whether or not the interpretation given to this provision by the Tribunal was correct or not. Whether it did so correctly or not, the Tribunal applied this provision as part of the applicable law.373

314.
The Committee thus concludes that the Tribunal's treatment of Article 5(3) of the Argentina-France BIT involved no manifest excess of powers.
315.
Nor does the Committee consider that the Tribunal failed to state reasons as required by Article 48(3) and Article 52(1)(e) of the ICSID Convention. As the Committee has already explained, what is required is that a reader can follow the Tribunal's reasoning, not that he or she must be persuaded by it.374 The reasoning in the Award on the scope and application of Article 5(3) is perfectly comprehensible. The Committee does not accept that the Tribunal committed an annullable error by not referring expressly to Argentina's contextual argument (outlined in paragraph 312 above). As the Enron Committee explained, while a tribunal has a duty to deal with each question put to it, "it is not required to comment on all arguments of the parties in relation to each of those questions".375 In the present case, the questions which required an answer were: what was the meaning of Article 5(3) and how did it apply to the facts of the present case. The Tribunal answered those questions and stated sufficient reasons for the answers which it gave.