Mr. R. Doak Bishop Mr. Craig S. Miles Mr. Roberto Aguirre Luzi Mr. Wade Coriell King & Spalding LLP 1100 Louisiana, Suite 4000 Houston, Texas 77002
B. Summary of the Procedure
1. Procedure Leading to the Decision on Jurisdiction
2. Procedure Leading to the Award on the Merits
"The Tribunal has carefully considered the Argentine Republic’s requests and the Claimants’ objections thereof. After due deliberation, the Tribunal has decided as follows:
(5) In regard to Argentina’s request for the exclusion of the testimonies of Messrs. Perkins, Mairal and Peacock, the Tribunal, in accordance with ICSID Arbitration Rule 34, decides to admit the witnesses’ statements filed by the Claimants. The Argentine Republic will have the opportunity to cross-examine these witnesses during the hearing on the merits. The Tribunal will inform the parties shortly on the manner in which cross examination will be conducted. This decision does not prejudge the question of the probative value of such testimonies, which will be determined by the Tribunal in due time."
"I write on instructions of the President of the Tribunal in connection with the parties’ recent exchange of correspondence regarding the arrangements for the forthcoming hearing on the merits in the present case.
The Tribunal, having reviewed the Argentine Republic’s letter of January 23, 25 and 26, 2006 and Claimants’ letter of January 23, 24 and 26, 2006, has decided as follows:
i. The testimony of Professor Diego J. Dzodan is admissible, as the Tribunal wishes to have all the information pertinent to issues of valuation;
ii. Because of the late filing of Professor’s Dzodan expert report, Claimants’ request to examine the expert Abdala and/or Spiller for one hour after the Respondent’s experts, including Professor Dzodan, is admitted;
iii. The Tribunal wishes to invite the parties to include in any post-hearing brief they may agree to produce, a brief final discussion of valuation issues;
vi. Production by the parties of witness or expert transcripts made at other hearings is not admissible as contrary to the principle of confidentiality of proceedings."
Members of the Tribunal:
Prof. Francisco Orrego Vicuna, President
The Hon. Marc Lalonde, P.C, O.C., Q.C., Arbitrator
Dr. Sandra Morelli Rico, Arbitrator
Mr. Gonzalo Flores, Secretary of the Tribunal
On behalf of the Claimant:
R. Doak Bishop (King & Spalding LLP)
Craig S. Miles (King & Spalding LLP)
Roberto Aguirre Luzi (King & Spalding LLP)
Wade Coriell (King & Spalding LLP)
Martin Gusy (King & Spalding LLP)
Carol Tamez (King & Spalding LLP)
Zhennia Silverman (King & Spalding LLP)
Luis Lucero (Fortunad & Lucero)
Esteban Leccese (Fortunati & Lucero)
Ramón Lanus (Fortunati & Lucero)
Dave Smith (Sempra Energy International)
Luigi Predieri (Camuzzi International S.A.)
Juan Rimoldi Fraga (Camuzzi International S.A.)
On behalf of the Respondent:
Osvaldo César Guglielmino, Procurador del Tesoro de la Nación Argentina Adolfo Gustavo Scrinzi (Procuración del Tesoro de la Nación Argentina)
Jorge R. Barraguirre (Procuración del Tesoro de la Nación Argentina)
Gabriel Bottini (Procuración del Tesoro de la Nación Argentina)
Ignacio Torterola (Procuración del Tesoro de la Nación Argentina)
Florencio Travieso (Procuración del Tesoro de la Nación Argentina)
Adriana Busto (Procuración del Tesoro de la Nación Argentina)
Pablo Fernández Lamela (Procuración del Tesoro de la Nación Argentina)
Tomás Braceras (Procuración del Tesoro de la Nación Argentina)
Nicolás Stem (Procuración del Tesoro de la Nación Argentina)
María Victoria Vitali (Procuración del Tesoro de la Nación Argentina)
Carlos Winograd (Procuración del Tesoro de la Nación Argentina)
Alicia Federico (Procuración del Tesoro de la Nación Argentina)
Femando Risuleo (Procuración del Tesoro de la Nación Argentina)
"I write on instructions of the President of the Tribunal as a follow-up to the hearing on the merits in the above proceedings, held in Santiago, Chile on February 6 through 14, 2006.
The Tribunal has taken note of Messrs. Patricio Carlos Perkins’, Raúl D. Bertero’s and Juan Carlos Fassi’s nonattendance of the hearing. The Tribunal has also taken note of Mr. Bertero’s letter dated February 3, 2006, accompanied by counsel for the Claimants during the hearing and of Mr. Fassi’s letter dated February 8, 2006, accompanied by the Argentine Republic during the hearing.
In this connection and as anticipated during the hearing, the Tribunal, having heard from the parties and after due deliberations, has decided as follows:
i. Notwithstanding Messrs. Bertero’s and Perkins’ absences, their written testimony is admitted, as their absence is due to circumstances beyond their control;
ii. In the case of Mr. Fassi, his written expert testimony (the P.A. Consulting Group report) is also admitted, as the Tribunal considers this expert testimony necessary to have a full view of the parties’ position on valuation of damages.
At the closing of the hearing, the Argentine Republic asked the Tribunal to dismiss the testimony of Mr. Santiago Albarracin and the expert testimony of Professor José Alvarez. As agreed by the parties, Argentina will submit its arguments in support of this request by Tuesday, February 21, 2006, and Claimants will file their response by Tuesday, February 28, 2006.
Also, in accordance with the parties’ agreement, post hearing briefs will be filed, simultaneously, by the parties on Monday, April 3, 2006. The post hearing briefs will not exceed 35 pages.
Finally, the Tribunal has taken note of the parties’ Agreement on the Discontinuance of the Treatment of Certain Claims of February 3, 2006, accompanied by the parties during the hearing. In light of this agreement, the Tax Claims described in Chapter VI, Section F of the Claimants’ Consolidated Memorial on the Merits are discontinued in the terms described in the Agreement. The Award will also take note of this discontinuance in due course."
"I write to you, on instruction from the President of the Tribunal, in connection with some pending matters in the above proceedings:
i. In regard to the testimony of Dr. Santiago Albarracin and the expert testimony of Professor José Alvarez:
The Tribunal has carefully reviewed the parties’ arguments on this matter, set forth in their letters of February 21, 2006 (Respondent) and February 28, 2006 (Claimants). After due deliberation, and in accordance with ICSID Arbitration Rule 34, the Tribunal has decided as follows:
(a) Dr. Santiago Albarracin was presented as a factual witness by the Claimants. As such, Dr. Albarracin provided written testimony of what he considered to be true facts. In his oral testimony, Dr. Albarracin added understandings and qualifications to his recollection of the facts. The Tribunal, considering the capacity in which Dr. Albarracin has testified, has decided to admit his testimony only insofar as it refers to facts he claims to have witnessed. The Tribunal will disregard all the qualifications and understandings made by Dr. Albarracin during his oral testimony, as they exceed the scope of the testimony he was called to provide;
(b) The Tribunal has also decided to admit Prof. José Alvarez’ expert testimony. The Respondent’s arguments have not persuaded the Tribunal that there is a legal impediment for Prof. Alvarez to provide expert testimony in these proceedings."
"I write to you, on instructions from the President of the Tribunal, in connection with the Argentine Republic’s letter dated February 9, 2007 and counsel for the Claimants’ response thereof dated February 22, 2007.
The Tribunal has carefully considered the parties’ submissions above and, after due deliberation, has decided, in accordance with Rule 34 of the ICSID Arbitration Rules, not to admit the documents enclosed with Argentina’s February 9, 2007 letter. The Tribunal will also disregard Claimants’ observations included in their February 22, 2007 letter that go beyond the question of the admissibility of Argentina’s submission.
The Tribunal is mindful of the parties’ wish and right to fully present their cases. The Tribunal also understands its duty to conduct the proceedings in an orderly and efficient manner. The Tribunal is confident that the parties in these proceedings have been given plenty of opportunities to fully present their arguments on each issue in dispute. Accepting Argentina’s non-invited submission at this late stage of the proceedings would open the door for a never ending exchange of arguments, unduly burdening both parties.
Having reached its conclusion for the reasons set above, the Tribunal does not consider necessary to review the relevance of the decision enclosed with Argentina’s submission, which was rendered by a different tribunal, over a distinctive set of facts and in view of a likely different set of arguments and evidence.
The parties are invited to refrain from filing any further non-invited submission in these proceedings."
3. Declaration of Closure of the Proceeding
The Stamp Tax Claim (Discontinuance)
[...] the Tribunal has taken note of the parties’ Agreement on the Discontinuance of the Treatment of Certain Claims of February 3, 2006, accompanied by the parties during the hearing. In light of this agreement, the Tax Claims described in Chapter VI, Section F of the Claimants’ Consolidated Memorial on the Merits are discontinued in the terms described in the Agreement. The Award will also take note of this discontinuance in due course.
The regulatory framework of Argentina’s Privatization Program
The Claimant’s investment in CGP and CGS
The measures complained of
The legal claims
The legal defenses
The first claim: PPI adjustment of tariffs
1. The facts of the claim
2 The Claimant’s arguments
3. The Respondent’s arguments
4. Additional discussions about the ENARGAS resolutions
5. The Tribunal’s findings on the first claim
It may also be noted that when the Chilean gas carrier Colbun pretended to pay in pesos for billings under export contracts on the ground that the PPI had been eliminated, and the case was taken to court, the view taken by ENARGAS and adopted by the Court of Appeals in that case affirmed that U.S. dollar-denominated tariffs and the PPI adjustment remained unaffected in respect of export contracts, and thus that such a right was quite independent of the question of costs and even of the Convertibility Law, which by that time had been derogated.6
The second claim: "Pesification of tariffs " under the Emergency Law
1. The facts of the claim
2. The Claimant’s arguments
3. The Respondent’s arguments
4. Discussion of the historical experience
5. The discussion about country risk
6. The Constitutional debate
7. Discussion about an incomplete regulatory framework
8. The Tribunal’s findings on the US dollar calculation of tariffs
The third claim: The breach of the License’s stability clauses
1. The Claimant’s arguments
2. The Respondent’s arguments
3. The Tribunal’s findings about the subsidies claim
1. The Claimant’s arguments
2. The Respondent’s arguments
3. The Tribunal’s findings
1. The valuation date
2. The inter-company loans
3. Regulated and non-regulated business
4. The issue of renegotiations
5. The Trust Fund
The law applicable to a finding of liability
The parties have given particular attention in their arguments to the meaning in this context of the Tecmed decision.63 The Claimant believes that this award reached the right conclusion, namely that an "Act of State must be characterized as internationally wrongful if it constitutes a breach of an international obligation, even if the act does not contravene the State’s internal law..." The Respondent, however, distinguishes that case because under the relevant investment promotion treaty, unlike the Treaty applicable to this case, domestic law has a different role, and also because the Tecmed, tribunal considered the relevant Mexican law to determine whether the treatment required had actually been afforded. The Tribunal concludes that the Respondent is right in asserting that the Tecmed award relates to an entirely different legal context, and that it does not provide helpful guidance in respect of the present dispute.
The stability of the License under the Argentine Constitution and contract law
Emergency as a defense under Argentine jurisprudence
"it is not useless to remind, as the Tribunal has done for long, that restrictions imposed by the State on the normal exercise of patrimonial rights must be reasonable, limited in time, and constitute a remedy and not a mutation in the substance or essence of the right acquired by judicial decision or contract... "70
1. First requirement: Temporality
2. Second requirement: No essential mutation of rights
3. Third requirement: Reasonableness
4. Unilateral determinations and adjustment by consent
The stability of licenses under Argentine administrative law
Liability under Argentine law
The principal claim made in this arbitration is that the measures adopted since early 2000, and particularly those taken in 2002 pursuant to the Emergency Law, have both directly and indirectly expropriated the Claimant’s investment in a manner contrary to the protection granted under Article IV of the Treaty. The Claimant argues that its investment comprises the equity in CGS and CGP, and also the specific contractual rights arising from the License regime. The Claimant maintains that its deprivation is permanent rather than merely ephemeral, and that no prompt, adequate and effective compensation has been paid. In the Claimant’s view, compensation must be paid irrespective of the purpose of the measures taken.83
In the Respondent’s view, what has been criticized by recent decisions is a kind of conduct that evidences either inconsistency in State action,93 radical and arbitrary modification of the regulatory framework,94 or endless normative changes to the detriment of the investor’s business as decided in the OEPC case cited. None of these, the Respondent’s argument follows, is present in the instant case since the measures adopted were eminently reasonable in the light of the economic crisis described above, and of the changes in the economic conditions of the country.
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 way 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.
3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall he accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the more favorable treatment, as regards any measures it adopts in relation to such losses.
This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfdlment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.