(a) the Tribunal manifestly exceeded its powers;

(b) there was a serious departure from a fundamental rule of procedure; and

(c) the Award failed to state the reasons on which it was based.

— the members of the Committee: Dr Gavan Griffith Q.C., President; Judge Patrick Lipton Robinson and Judge Per Tresselt;

— the representatives of the Claimants: Mr R. Doak Bishop, Mr Craig S. Miles, Ms Kerrie Nanni and Mr David Weiss of King & Spalding; and Dr Guido Santiago Tawil, Dr Hector María Huici and Dr Federico Campolieti of M. & M. Bomchil, Abogados;

— the representatives of the Argentine Republic: Sub-Procurador del Tesoro de la Nación Dr Adolfo Gustavo Scrinzi, Dr Gabriel Bottini, Dr Ignacio Pérez Cortés, Dr Verónica Lavista, Dr Tomás Braceras, Dr Rodrigo Ruiz Esquide, Dr María Alejandra Etchegorry and Dr Ignacio Torterola of the Procuración del Tesoro de la Nación;

— the Secretary to the Committee: Mr Gonzalo Flores;

— counsel to the Committee: Ms Anneliese Fleckenstein;

— the legal assistant of the Committee: Dr Christopher Staker.

(1) 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.

... the role of an ad hoc committee is a limited one, restricted to assessing the legitimacy of the award and not its correctness.... The annulment mechanism is not designed to bring about consistency in the interpretation and application of international investment law. The responsibility for ensuring consistency in the jurisprudence and for building a coherent body of law rests primarily with the investment tribunals. They are assisted in their task by the development of a common legal opinion and the progressive emergence of " une jurisprudence constante "...⁹

... [u]nder Article 52(1)(d), the emphasis is clearly on the term "rule of procedure," that is, on the manner in which the Tribunal proceeded, not on the content of its decision.¹⁵

[I]t 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.... 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)(l)(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.²³

It is in the nature of this ground of annulment that in case the award suffers from a lack of reasons which can be challenged within the meaning and scope of Article 52(1)(e), the remedy need not be the annulment of the award. The purpose of this particular ground for annulment is not to have the award reversed on its merits. It is to allow the parties to understand the Tribunal’s decision. If the award does not meet the minimal requirement as to the reasons given by the Tribunal, it does not necessarily need to be resubmitted to a new Tribunal. If the ad hoc committee so concludes, on the basis of the knowledge it has received upon the dispute, the reasons supporting the Tribunal’s conclusions can be explained by the ad hoc Committee itself.²⁴

(a) under Article 52(1)(e) of the ICSID Convention, on the ground that the Tribunal failed to state reasons for its conclusion that the Claimants could bring a claim in respect of alleged violations of rights which belonged not to them, but to TGS;³⁴

(b) under Article 52(1)(b) of the ICSID Convention, on the ground that the Tribunal exceeded manifestly its powers in exercising jurisdiction over the Claimants' claims, all of which are grounded on alleged interference with rights under the License, which did not confer any rights on the Claimants and to which TGS, rather than the Claimants, was a party.³⁵

Argentina argues, inter alia, that:

In relation to the ground of annulment in Article 52(1)(e) of the ICSID Convention

(a) While an investment in shares is protected under the BIT and shareholders have an independent claim from that of the company if events affect their rights as shareholders, and while the Claimants are thus protected investors under the BIT and their investment in TGS is thus a protected investment, the Claimants cannot as shareholders pursue an individual action against third parties as a result of a claimed violation of rights that did not belong to them but to TGS.

(b) In the First Jurisdiction Decision, the Tribunal failed to analyze this issue.

(c) The Second Jurisdiction Decision also failed to resolve the issue, arguing that such issue had already been discussed in the First Jurisdiction Decision.³⁶

(d) In the Award, the Tribunal stated that this issue had already been solved in its decisions on jurisdiction,³⁷ when in fact this was not the case.³⁸ When determining Argentina's responsibility, the Tribunal only referred to the rights of TGS under the Licence.³⁹

(e) The Tribunal also did not deal with Argentina's argument based on Article 25(2)(b) of the ICSID Convention, and the Tribunal did not eliminate or resolve the issue of multiple claims.

In relation to the ground of annulment in Article 52(1)(b) of the ICSID Convention

(f) A tribunal's partial or total lack of jurisdiction is an "excess of powers" under Article 52(1)(b),⁴⁰ and an excess of powers is always "manifest" if it relates to matters of jurisdiction.⁴¹

(g) The Tribunal did not have jurisdiction over this case because the Claimants were requesting damages for alleged violations of rights that did not belong to them but to TGS. The legal and contractual rights of TGS, including the rights of TGS under the Licence were not indirectly controlled by the Claimants, and therefore neither TGS, nor its assets, nor its legal and contractual rights, are investments of the Claimants under Article I(1)(a) of the Treaty. The Claimants' investment in Argentina only consisted of their indirect non-controlling shareholding in TGS. The Claimants were not entitled to bring ICSID proceedings in respect of alleged violations of the rights of TGS, but only in respect of alleged violations of the BIT in respect of their own investment, i.e. their indirect non-controlling shareholding in TGS.

(h) Neither general international law nor the BIT defines shareholder rights, and domestic law (the lex societatis) must be resorted to in order to establish which rights a shareholder has.⁴² All legal systems draw a distinction between the corporation and its shareholders, and "corporate identity" is only disregarded when it has been used for fraudulent purposes.⁴³

(i) It is wrong to reject the application of the Barcelona Traction case to investment treaty arbitrations, since if an investment treaty is silent on the issue of indirect claims,⁴⁴ the matter should be resolved by reference to general principles of international law.

(j) If shareholders were allowed to sue and to obtain compensation for the infringement of rights of the corporation, problems would arise, including the risk of double recovery, if the corporation filed its own claims before the national courts of the host State or if the corporation came to an agreement with the host State, or if the corporation had creditors or had to pay local taxes for the amounts obtained as a result of the litigation. The Tribunal did not resolve this issue on the basis of legal provisions,⁴⁵ as it was obliged to, but relied upon equity considerations, which amounts to a manifest excess of its powers.⁴⁶

(k) The Tribunal's conclusion that a shareholder may claim directly for measures that affected the rights of the company leaves Article 25(2)(b) of the ICSID Convention with no effet utile, contrary to what had been negotiated by the States in drafting the Convention.⁴⁷

(l) Even if the BIT allowed the filing of indirect claims, such claims would not be admissible in ICSID proceedings as the "outer limits" of ICSID jurisdiction are set forth in Article 25 of the ICSID Convention and "are not subject to the parties' disposition".

(m) The Claimants are in fact indirect shareholders of TGS, increasing the risk of double recovery, since different shareholders in different positions of the shareholding chain might make simultaneous claims. The Tribunal's solution to this problem, to require a claiming shareholder to have been "invited by the Government... to participate in the investment",⁴⁸ is not supported by domestic, international, or any other law, and is uncertain. The Tribunal invented a rule that is not part of the applicable law and that does not resolve the problem of multiple claims.⁴⁹ The Azurix case is distinguishable since the Claimants in the present case did not and do not have a controlling shareholding in the local company.

(n) If the Tribunal considered that the Claimants could claim for the damage to their indirect shareholding in TGS, it could not simultaneously distinguish between TGS's regulated and unregulated activities. The Tribunal failed to provide any grounds for its decision to consider only regulated activities.

(o) Argentina has successfully renegotiated public utility contracts in a number of sectors, and TGS is renegotiating the terms of its License with the Argentine Government, but decisions such as the Award have increased transaction costs and are impeding the renegotiation process.

(p) Any future increase of TGS's tariffs would necessarily entail a double recovery.

In relation to the ground of annulment in Article 52(1)(e) of the ICSID Convention

(a) In the First Jurisdiction Decision, the Tribunal specifically adopted the reasoning of other tribunals when evaluating whether a shareholder could assert claims independently of the local company, rather than regurgitating the same words that numerous other tribunals had already used.⁵⁰ The Tribunal never treated those decisions as binding, but adopted their reasoning, which the Tribunal was entitled to do. The Tribunal also examined the language of the BIT,⁵¹ and considered and rejected Argentina's argument that a shareholder may only assert claims to the extent that its rights qua shareholder were affected,⁵² Argentina's arguments based on the Barcelona Traction case⁵³ and Argentina's arguments concerning minority shareholders.⁵⁴

(b) There was no need for the Second Decision on Jurisdiction to repeat the reasoning included in the First Decision on Jurisdiction.

(c) The Tribunal was not required to determine the extent to which the Claimants could file a claim under the License instead of the BIT, but in any event, the Tribunal did examine the difference between a BIT claim and a contract claim.⁵⁵

(d) Since the Claimants did not assert claims for breach of contract, it was not necessary for the Tribunal to make such a determination. The Tribunal's finding that Argentina breached the BIT was not based upon breaches of the License, although this was certainly a factor in the Tribunal's analysis of Argentina's overall conduct relative to the BIT standards.

(e) The Tribunal was not required to address Argentina's arguments concerning the hypothetical risk of double recovery, but in any event, did address this issue.⁵⁶

In relation to the ground of annulment in Article 52(1)(b) of the ICSID Convention

(f) The dispute before the Tribunal was not for breach of contractual rights belonging to TGS but for damages arising from Argentina's violations of the BIT and the resulting harm to the Claimants' investment in TGS. It is immaterial that TGS might have had its own claims against Argentina.

(g) Because Article 25 does not define "investment," that task was "left largely to the terms of bilateral investment treaties or other instruments on which jurisdiction is based." The Tribunal evaluated Claimants' investment and determined that it satisfied the definition of "investment" under the BIT, which the Tribunal found includes "the channelling of investments through locally incorporated companies, particularly when this is mandated by the very legal arrangements governing the privatization process in Argentina".⁵⁷

(h) The Tribunal's decision is consistent with more than 22 other ICSID cases, where the tribunals have unanimously found jurisdiction to exist in the same or similar circumstances.⁵⁸ Argentina cites no relevant authority to show that the Tribunal could not accept jurisdiction in this case.

(i) The Barcelona Traction case does not require that domestic law regarding corporations be transplanted to cases involving indirect claims under a BIT. The Barcelona Traction case, in which no investment treaty was involved, itself recognized the developments occurring in international law on investment protection, especially investment protection treaties, which may accord direct protection to shareholders.⁵⁹

(j) The BIT, as lex specialis, specifically allows shareholders to assert an action for damage caused by violations of the BIT by explicitly defining "investments" to include those "owned directly or indirectly " and listing "a company" and "shares in a company" as well as "rights conferred by law or contract".⁶⁰

(k) Governments often require foreign investors to make their investment in a project through a locally-incorporated company, at times with other shareholders such as local nationals, and foreign investors would have no real protection under BITs and international law if they could not bring a BIT action for damages to their investment.⁶¹

(l) It is not the case that, since neither investment treaties nor international law regulate the rights of shareholders, rights related to shares in a corporation must be determined by reference to domestic law.⁶²

(m) The Barcelona Traction case has been heavily criticised.⁶³

(n) The case law of the European Court of Human Rights relied upon by Argentina is irrelevant to this case because the BIT provides protection for both direct and indirect rights, because the European Court decisions are limited to the lex specialis regime of the European Court, and because the European Court has a pronounced policy of deferring to municipal law. By contrast, no such rule of deference to municipal law or harmonization is contained in either the BIT or the ICSID Convention.

(o) Argentina's acts and omissions may amount to both violations of the BIT and breaches of the License, but Claimants are not barred from bringing their own BIT claims simply because Argentina's acts and omissions also breached the License.⁶⁴ The claims made against Argentina were not contractual claims relating to the License; they were claims for Argentina's specific violations of the BIT, and are therefore not correctly described as "indirect claims".⁶⁵

(p) The Tribunal did not base its decision to allow the Claimants' claims to proceed on the fact that Argentina invited the Claimants to invest but on the text of the BIT.

(q) Article 25(2)(b) of the ICSID Convention is not applicable in the current case because TGS was not a party to the arbitration, and the Tribunal therefore rightly concluded that Article 25(2)(b) was irrelevant.⁶⁶

... a jurisdictional argument which the Respondent has reiterated in the pleadings on the merits to the effect that the investors are not the licensees and, therefore, cannot invoke the terms of a contract to which they are not parties. The Tribunal has dealt with this question in its Decision on Jurisdiction.

This reference to the "Decision on Jurisdiction" must be a reference to the Second Jurisdiction Decision, which concerned jurisdiction over the "ancillary claim", which was the subject of the Award.

Since these arguments have already been discussed in the Stamp Tax Decision [that is, the First Jurisdiction Decision] , and the situation in respect of this dispute is not different, the Tribunal will address them briefly and devote more attention to certain aspects that the Argentine Republic has emphasized in respect of this particular dispute.

It follows that the Tribunal is persuaded that again in this case the Claimants have ius standi to claim in their own right as they are protected investors under the Treaty. The Claimants’ right to bring an action on their own has been firmly established in the Treaty and there are no reasons to hold otherwise in connection with this dispute. Neither is this situation contrary to international law or to ICSID practice and decisions.

At the end of the first sentence of this paragraph there is a footnote reference to paragraphs 62-63 of the Azurix Jurisdiction Decision.

In the First Jurisdiction Decision, the argument of Argentina is described by the Tribunal at paragraphs 34-37. At paragraphs 38-39 it said that " for the sake of brevity " it would not repeat " The reasoning supporting the... holdings " in other ICSID cases on a range of identified questions relevant to Argentina's argument. Some of the other decisions in question are cited in footnotes 7 and 8 of the decision.⁷⁰ From paragraph 24 of the decision and accompanying footnote reference 3, it is furthermore apparent that the prior decisions relied upon included, in addition to the Lanco Jurisdiction Decision and CMS Jurisdiction Decision,⁷¹ the Vivendi Award and Vivendi Annulment Decision. At paragraph 40 the Tribunal noted that while those prior decisions were not binding, the Tribunal " believes that in essence the conclusions and reasons of those decisions are correct ".

It is sufficient for the purpose of the present case to emphasize that there is nothing contrary to international law or the ICSID Convention in upholding the concept that shareholders may claim independently from the corporation concerned, even if those shareholders are not in the majority or in control of the company.

A statement of this proposition supported by reasons is contained in the CMS Jurisdiction Decision at paragraphs 43-48. The Committee is satisfied that those paragraphs in the CMS Jurisdiction Decision provide sufficient reasons for that general conclusion.

(a) No issue arose in the present case as to the ius standi of the Claimants to bring a claim on TGS's behalf or in respect of TGS's rights. The issue was whether the Claimants had ius standi to bring a claim alleging a violation of the BIT in respect of their own investment and, if so, whether, in the circumstances of the case the provisions of the BIT had been violated in respect of the Claimants' investment.⁸⁷

(b) It is not the Committee's function to reach its own conclusion on the correct interpretation of the BIT and ICSID Convention in respect of these questions, but to determine whether the Tribunal manifestly exceeded its powers in reaching the conclusion that it did.⁸⁸

(c) In addressing this question, the Committee must itself consider the terms of the BIT and the ICSID Convention, which fall to be interpreted in accordance with customary international law rules of treaty interpretation as codified in the 1969 Vienna Convention on the Law of Treaties.⁸⁹

(d) The Barcelona Traction case concerned customary international law rules of diplomatic protection rather than investment treaty arbitration, and except where norms of ius cogens are involved, a treaty is capable of modifying the rules of customary international law that would otherwise be applicable as between the States parties to the treaty. Hence the starting point in determining the effect of the treaty is the terms of the treaty itself, rather than the principles of customary international law that may or may not be displaced by the treaty provisions.⁹⁰

1. For the purposes of this Treaty,

a) "investment" means every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party, such as equity, debt, and service and investment contracts; and includes without limitation:

(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;

(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;

(iii) a claim to money or a claim to performance having economic value and directly related to an investment;

(iv) intellectual property which includes, inter alia, rights relating to: literary and artistic works, including sound recordings, inventions in all fields of human endeavor, industrial designs, semiconductor mask works, trade secrets, know-how, and confidential business information, and trademarks, service marks, and trade names; and

(v) any right conferred by law or contract, and any licenses and permits pursuant to law...

In this case there was clearly a dispute between Azurix and Argentina, and that dispute concerned an alleged breach of rights conferred by the BIT with respect to what the Tribunal found was, for the purposes of the BIT, an investment of Azurix. In its ordinary meaning, here there was an investment dispute between Azurix and Argentina.⁹³

(a) under Article 52(1)(b) of the ICSID Convention, on the ground that the Tribunal exceeded manifestly its powers in deciding that it had jurisdiction notwithstanding the express clauses on the election of the forum;¹⁰² and

(b) under Article 52(1)(e) of the ICSID Convention, on the ground that the Tribunal "seriously contradicted itself" by allowing the Claimants to make claims based on the License while at the same time stating that the forum selection clause in the License did not prevent it from exercising jurisdiction over those claims.¹⁰³

(a) The Tribunal lacked jurisdiction due to the existence of a forum selection clause in the Licence, which provided that "For all purposes connected with this License as it relates to the Grantor, the Licensee submits itself to the courts with jurisdiction over administrative law matters of the City of Buenos Aires" and that "Federal courts shall have jurisdiction over disputes with other parties concerning the License".

(b) The Bidding Terms and the Gas Law also provided for the jurisdiction of local authorities.

(c) All of the Claimants' claims for breaches of the Treaty were related to the License between the Federal State and TGS, regardless of the fact that the Claimants disguised them as claims under the BIT.¹⁰⁴ The Tribunal itself recognised in the Award that the claims were based on the License and the regulatory framework.¹⁰⁵

(d) Treaty tribunals should decline their jurisdiction when the investor brings a cause of action based on a contract before a treaty tribunal and the contract contains a forum selection clause in favour of a different court or tribunal.¹⁰⁶ Dispute settlement provisions in bilateral investment treaties do not override forum selection clauses in contracts.¹⁰⁷

(e) The Tribunal awarded the Claimants compensation calculated on the basis of the income TGS would supposedly have obtained under the License rather than on the basis of any causality theory linking the alleged damages to the purported breaches of the BIT. It therefore cannot be held that the claim is independent from the Licence. It was contradictory of the Tribunal to award compensation based on the Licence but to find that the forum selection clause in the Licence did not prevent it from exercising jurisdiction.

(f) The Claimants could not seek to benefit from the License without being subject to the limitations thereof, including the forum selection clause.¹⁰⁸ Either the Claimants were entitled to make claims based on the Licence and were bound by the forum selection clause, or were not entitled to make claims based on the Licence in which case they lacked ius standi.

(g) The fact that this matter was decided by the Tribunal does not prevent the matter from being considered by the Committee in order to determine whether the Tribunal has manifestly exceeded its powers in the terms of Article 52(1)(b) of the ICSID Convention.

(a) Argentina raised a similar jurisdictional objection in relation to the Stamp Tax Claim which was rightly rejected by the Tribunal in the First Jurisdiction Decision.¹⁰⁹

(b) The Tribunal similarly, in its Second Jurisdiction Decision, correctly rejected Argentina's argument based on the forum selection clause in the Licence on the basis that "the essence of the claims... relates to alleged violations of the Treaty rights".¹¹⁰

(c) The Claimants were not parties to the Licence and therefore could not be bound by the forum selection clause in it.

(d) In any event, the issue is not whether the claim touches on a contract with a forum selection clause, but rather, the fundamental basis of the claim. If the "fundamental basis of a claim" is a treaty, a forum selection clause in a contract cannot bar the application of a treaty standard.¹¹¹ Other annulment committees have reached the same conclusion,¹¹² as have other Tribunals including in cases involving Argentina.¹¹³

(e) Argentina does not point to a single decision that holds otherwise. Neither the SGS v. Pakistan Jurisdiction Decision nor SGS v. Philippines Jurisdiction Decision stands for the proposition that exclusive forum clauses exclude ICSID jurisdiction over BIT claims.

(f) There is no contradiction in the Tribunal's reasoning: the Claimants made claims for damage to their investments caused by Argentina's violation of the BIT, and thus the Claimants were not bound by the forum selection clause in the Licence.

(g) Argentina misinterprets the Tribunal's words and ignores the very concept of "investment." It was Claimants who were targeted by Argentina in the 1990s with a view to attracting foreign investors, and who invested in Argentina's privatization process.

(h) Although the Claimants' claim does involve Argentina's dismantling of the guarantees granted under the License and the Regulatory Framework, that does not mean that the Claimants made a contractual claim for breach of the License. The same facts may be analyzed very differently under international law than under municipal law. The fact that an act or omission by a State constitutes a breach of contract does not necessarily imply that there is a breach of a BIT or of international law.

The Tribunal is mindful of the various ICSID decisions that have recently discussed this very issue, particularly those in Lanco, Compañía de Aguas del Aconquija (Award and Annulment), Wena, CMS and Salini . In all these cases the tribunals have upheld jurisdiction under the Convention to address violations of contracts which, at the same time, constitute a breach of the pertinent bilateral investment treaty. The Tribunal will not repeat those considerations.¹¹⁴

49. The distinction between these different types of claims has relied in part on the test of the triple identity. To the extent that a dispute might involve the same parties, object and cause of action it might be considered as a dispute where it is virtually impossible to separate the contract issues from the treaty issues and drawing from that distinction any jurisdictional conclusions.

50. However, as the Annulment Committee held in Vivendi , "A treaty cause of action is not the same as a contractual cause of action; it requires a clear showing of conduct which is in the circumstances contrary to the relevant treaty standard". The tribunal also held in CMS , referring to this line of decisions, that "as contractual claims are different from treaty claims, even if there had been or there currently was a recourse to the local courts for breach of contract, this would not have prevented submission of the treaty claims to arbitration".

51. In this case, although there are no doubt questions concerning the Contract between the parties, the essence of the claims, like in the Stamp Tax Claim, relates to alleged violations of the Treaty rights. Having the Tribunal [sic] concluded that there are no reasons to change the conclusions on jurisdiction reached in the Stamp Tax Claim Decision, the distinction between contract-based claims and treaty-based claims looses [sic] to a great extent its significance in the present phase of the case.¹¹⁵

101. On the other hand, where "the fundamental basis of the claim" is a treaty laying down an independent standard by which the conduct of the parties is to be judged, the existence of an exclusive jurisdiction clause in a contract between the claimant and the respondent state or one of its subdivisions cannot operate as a bar to the application of the treaty standard. At most, it might be relevant—as municipal law will often be relevant—in assessing whether there has been a breach of the treaty.

102. In the Committee’s view, it is not open to an ICSID tribunal having jurisdiction under a BIT in respect of a claim based upon a substantive provision of that BIT, to dismiss the claim on the ground that it could or should have been dealt with by a national court. In such a case, the inquiry which the ICSID tribunal is required to undertake is one governed by the ICSID Convention, by the BIT and by applicable international law. Such an inquiry is neither in principle determined, nor precluded, by any issue of municipal law, including any municipal law agreement of the parties.

103. Moreover the Committee does not understand how, if there had been a breach of the BIT in the present case (a question of international law), the existence of Article 16(4) of the Concession Contract could have prevented its characterisation as such. A state cannot rely on an exclusive jurisdiction clause in a contract to avoid the characterisation of its conduct as internationally unlawful under a treaty.¹¹⁸

We believe that Article 11.1 of the PSI Agreement is a valid forum selection clause so far as concerns the Claimant's contract claims which do not also amount to BIT claims , and it is a clause that this Tribunal should respect.¹¹⁹

The tribunal then concluded that:

... the Tribunal has no jurisdiction with respect to claims submitted by SGS and based on alleged breaches of the PSI Agreement which do not also constitute or amount to breaches of the substantive standards of the BIT.¹²⁰

Provided the facts as alleged by the Claimant and as appearing from the initial pleadings fairly raise questions of breach of one or more provisions of the BIT, the Tribunal has jurisdiction to determine the claim.¹²¹

The tribunal went on to say that in that particular case, the dispute was on its face about the amount of money owed under a contract,¹²² and that that case could be distinguished from SGS v. Pakistan which was said to arguably raise a breach of the BIT independent of a breach of contract, and the Vivendi case where "the claim presented by the Claimant went beyond the scope of the concession agreement and involved allegations which, if proved, were capable of amounting to breaches of a BIT".¹²³ The Committee does not consider that this decision clearly supports Argentina's position.

... where what is contended in the treaty claim is mainly that the contract has been violated and that this violation constitutes in turn and by another name (figuring in the treaty) a treaty violation, such a nominal trick does not suffice to transform the contract claim into a treaty claim or to create a parallel treaty claim. To use the terminology of Vivendi II, "where ‘the fundamental basis of the claim’" is the contract, however, many more layers of claims one tops it with, it remains a contract claim, which has to be settled according to the terms of the contract and in the forum chosen in that contract.¹²⁴

... prima facie evidence that the termination of the concession contract and consequent action by the Argentinian government may have been motivated, not only by TSA’s alleged grave breaches of the concession contract, but also by other considerations which seem to fall within the purview of the BIT guarantees.¹²⁵

The concurring opinion then concluded that:

These considerations, independent of the alleged violations of the contract, are, in my view, sufficient prima facie to constitute the subject-matter of a treaty claim, and consequently to bring the jurisdictional clause of the BIT into play.¹²⁶

The Tribunal, after considering the Claimant’s letter of October 24, 2005, and the Respondent's letter of November 3, 2005, does not consider it appropriate to issue an Order on Provisional Measures in this matter.

The Tribunal wishes to remind the parties that this is an issue that has already been decided upon by the Tribunal (Tribunal's letter to the parties of April 22, 2005). In that occasion, the Tribunal informed the parties that the question concerning Mr. Perkins’ eventual obligations with the Republic of Argentina is a matter that can only be dealt with in the context of the contract between Mr. Perkins and the Argentine Republic or its agencies and not before this Tribunal.

The Tribunal decides accordingly to admit Mr. Perkins’ testimony. This is without prejudice to the question of the evidentiary value of such testimony which the Tribunal will weigh in due course.

The Tribunal also expects the Argentine Republic to facilitate the participation of Mr. Perkins in this proceeding in accordance with the Article 22 of the Convention.

The Tribunal would have wished that Mr. Perkins had been examined and cross-examined on this and other aspects of his testimony, and also to put questions to him, but his participation in the hearing on the merits was regrettably prevented by an injunction issued by an Argentine judge on November 24, 2005 at the request of the Government. The Tribunal makes no inference of this situation, but decided in Procedural Order No. 5, dated December 2, 2005, that the witness’ written statement was admissible and that, moreover, Mr. Perkins enjoyed and continues to enjoy the immunities provided under Articles 21 and 22 of the ICSID Convention.

Argentina argues, inter alia, that:

(a) The Tribunal took into account the evidence of Mr Perkins as a "key official in the privatization process"¹³² which in view of the existence of a confidentiality clause and the injunction of the Argentine court, was provided illegitimately. The use of evidence that has been illegitimately obtained has been harshly criticised.¹³³

(b) The Tribunal's decision to reject the Claimants' request acknowledged that the injunction obtained from an Argentine court had been legitimate as it stated that "Mr. Perkins’ eventual obligations with the Republic of Argentina is a matter that can only be dealt with in the context of the contract between Mr. Perkins and the Argentine Republic or its agencies and not before this Tribunal ’.

(c) The Tribunal thereby seriously damaged Argentina's right to defence, which is "an essential part of the right to a fair trial.’¹³⁴

(d) The Tribunal thereby also violated the principle of equality of the parties, which constitutes one of the main characteristics of the process in which a decision needs to be reached.¹³⁵

(e) The admission of this evidence "implied preventing Argentina from exercising its right to fair treatment’.

(a) Mr Perkins testified on exactly the same subject matter in the CMS case, and the CMS Tribunal rejected that objection.

(b) Since the injunction was issued by the Argentine court, in over three years no decision has been rendered by that court on the merits of the alleged breach of the confidentiality clause, confirming that Argentina's challenge was a pure litigation tactic to intimidate the witness and to actually prevent him from testifying at the hearing.

(c) The Tribunal exercised its authority under ICSID Arbitration Rule 34(1) to decide the admissibility of Mr Perkins's written testimony and its probative value, and the Committee should not second-guess the Tribunal's decision on this issue.

(d) The Tribunal had no jurisdiction to determine whether or not Mr Perkins had breached any confidentiality obligation under an agreement with YPF.

(e) In making its objection in this case and promoting local proceedings against Mr Perkins, Argentina violated Articles 21 and 22 of the ICSID Convention, which grant immunity from legal process to witnesses.

(f) Argentina had a full opportunity to rebut Mr Perkins's testimony in its Counter-Memorial and Rejoinder, and it was Argentina's own actions that barred Mr Perkins from attending the hearing and being cross-examined.

(g) There is a clear difference between "evidence which is illegitimately obtained" and the evidence submitted in this case, which was freely given by Mr Perkins.

(h) Mr Perkins disclosed no confidential information, and his witness statement only ratified what had been proved by multiple sources of evidence in the record.

(i) Even if Mr Perkins' witness statement was excluded the Tribunal would have reached the same conclusion.¹³⁶

It was agreed that after the submissions stipulated in paragraph 16 above, no other documents shall be submitted by the parties unless an extraordinary situation arises and it is agreed by both parties or the Tribunal. The Tribunal may request additional documents if necessary for the conduct of the litigation.

With its Rejoinder on the Merits, Argentina introduced for the first time several new expert reports that deal with issues already addressed in Claimants’ Memorial, and which therefore should have been filed by Argentina together with the Counter-Memorial.

The letter stated that by waiting to file these documents with its Rejoinder, Argentina had violated ICSID Arbitration Rule 24¹³⁷ and had tried unfairly to restrict the Claimants' fundamental right to due process by denying them the ability to rebut these reports. The letter went on to say that accordingly, " in the exercise of its fundamental rights " the Claimants were enclosing with the letter two new expert reports to rebut the reports filed with Argentina's Rejoinder. One of the two new reports submitted with that letter was by Mr Bianchi.

The Tribunal... decides that it will consider the new Claimants’ expert reports but only to the extent that they refer or directly relate to the new expert reports submitted by the Respondent with its Rejoinder....

The additional documentation that the Claimants have submitted will be considered on the same conditions and requirements referred to above. The Respondent may raise specific objections to this documentation during the hearing. The Tribunal will take a decision on the relevance of this documentation at the hearing.

(a) The Claimants waited three and a half months to produce the new reports, until only one month before the hearing on the merits, when Argentina had produced its Rejoinder in 60 days.

(b) Neither the Claimants nor the Tribunal established the existence of any "extraordinary situation’ as required by paragraph 19.1 of the minutes of the First Session of the Tribunal.

(c) Mr Bianchi's report was a deciding factor for the Tribunal as far as the exercise of police power in emergency situations is concerned.¹³⁸

(d) The Tribunal violated Argentina's right of defence and the equality of treatment between the parties, by providing the Claimants with three opportunities to produce evidence when Argentina only had two.

(e) Inequitable treatment on the part of the Tribunal constitutes a serious violation of a core rule of procedure in the terms of Article 52(1)(d) of the ICSID Convention.

(a) Professor Bianchi's expert report was submitted in response to the report of Argentina's expert, Professor Comadira, which raised new issues for the first time in Argentina's Rejoinder. Professor Comadira's expert report should have been submitted with Argentina's CounterMemorial, allowing Claimants an opportunity to properly rebut it in their Reply, and there is no reason why Argentina could not have submitted it at that time.

(b) If the Tribunal had not allowed Claimants to submit Professor Bianchi's expert report, Claimants' right of due process would have been seriously affected by Argentina's strategy of withholding evidence until the last possible moment. Allowing submission of Professor Bianchi's expert report was absolutely necessary in order to treat the parties equally and fairly.

(c) Argentina cross-examined Professor Bianchi for an hour during the hearing on the merits.

(d) Under the ICSID Convention tribunals have a discretion whether or not to allow expert reports upon request of either party, and the Tribunal's decision to accept Professor Bianchi's expert report was within the exercise of that discretion.

(e) Even without Professor Bianchi's expert report, the Tribunal would have reached the same conclusion based on Argentine case law. Argentina cannot show any material effect on the outcome of the case.

(f) Argentina gives no indication of what fundamental rule of procedure was breached or how such a departure from the rule was serious or would have "caused the Tribunal to reach a result substantially different from what it would have awarded had such a rule been observed’.

A decision by a tribunal whether or not to exercise a discretionary power that it has under a rule of procedure is an exercise of that rule of procedure, and not a departure from that rule of procedure. It is only where the exercise of that discretion, in all of the circumstances of the case, amounts to a serious departure from another rule of procedure of a fundamental nature that there will be grounds for annulment under Article 52(1)(e) of the ICSID Convention.¹³⁹

On behalf of the Arbitral Tribunal, I write to inform you that the proceeding is declared closed as of today’s date in accordance with Rule 38(1) of the ICSID Arbitration Rules.

The President of the Tribunal, after having consulted with the Tribunal’s members, has asked me to inform you of the following: The Tribunal, after having carefully examined the Respondent’s letter of April 26, 2007 and the Claimant’s letter of May 4, 2007, wishes to inform the parties, as a matter of courtesy, that the closing of the proceedings in this case was decided only in consideration to the advanced stage of deliberations and the fact that final translations and editing of the award were well under way.

(a) There was still a request filed by Argentina on January 18, 2007 pending resolution as regards serious actions committed by ENRON representatives, which were extremely relevant for the present arbitration.

(b) In spite of the seriousness and importance of the requests and claims made by Argentina, the Tribunal failed to make a decision in this regard and closed the proceeding, thus affecting Argentina's right to defence. Considering and assessing evidence is a crucial aspect of the fair and impartial assessment of the procedure. Failing to settle such a serious claim filed by Argentina warrants the annulment of the Award.

(c) Closure of the proceedings only 14 days after Argentina Republic had proposed the disqualification of the President of the Enron tribunal in the Sempra and Camuzzi cases, and only 6 days after Argentina had explained in writing the grounds for such disqualification proposal, and even though a decision on Argentina's request was pending, made it impossible for the Tribunal to analyze the Claimants' attitude at the meeting held at the Argentine Treasury Attorney General's Office, in which the Claimants' attorneys stated that, if they received USD 40 million they would abandon this arbitration proceeding, when they demanded the payment of USD 453 or 639 million, depending on the calculation method.

(d) Failing to settle such serious requests filed by Argentina before closing the proceedings was a serious departure from a fundamental rule of procedure in terms of Article 52(1)(d) of the ICSID Convention.¹⁴³

(a) The Tribunal's decision to close the proceedings was adopted 6 years after the case was filed and 15 months after the hearing on the merits and the post-hearing briefs were submitted.

(b) Argentina had ample time to file a challenge to one of the arbitrators but never did so. This case had no relationship with the Sempra or Camuzzi cases, and if Argentina considered it appropriate to challenge the President of the Tribunal in this case, it could have done so earlier, or even after closure of the proceedings based on Rule 38(2) of the ICSID Arbitration Rules. Argentina's voluntary decision not to challenge an arbitrator cannot be used later as a valid ground for annulment.¹⁴⁴

(c) There were no "pending requests" at the time that the Tribunal decided to close the proceedings. Argentina's letter to the Tribunal dated January 8, 2007, merely requested the Tribunal to decide the truth of what was said in a settlement meeting that occurred long after the merits hearing had concluded, and it is hard to argue that there was any other pending request in the letter.

(d) Since the parties did not settle the dispute, what occurred at settlement discussions long after the hearing on the merits was concluded was irrelevant to the proceeding.

(e) It is not a serious departure from a fundamental rule of procedure for a tribunal to decline to consider an issue that it considers to be irrelevant, merely because one of the parties considers it to be important.¹⁴⁵

Interpretation of the Licence

Generally

(a) The Tribunal said that it had analysed the extent to which Argentina's obligations were fulfilled in terms of Argentine law since "the License is expressly subject to Argentine law in some key aspects", but groundlessly and in manifest excess of power concluded that those obligations were not fulfilled.¹⁴⁹

PPI adjustments

(b) The Tribunal expressed no grounds for its conclusions that Argentina guaranteed that the tariffs would be " adjusted semi-annually in accordance with the US PPI ",¹⁵⁰ and that " such understanding was also the Government’s view at the time and for almost a whole decade".¹⁵¹ nor analyzed the arguments put forward by Argentina.

(c) The Tribunal stated that Decree 669/2000 confirmed the existence of the "right" to PPI-based adjustment since it referred to the adjustment as a "legitimately acquired right", but the Claimants could not in 1992 have had an expectation based on a decree issued in 2000.

(d) The Tribunal derived rights from the Information Memorandum¹⁵² notwithstanding it was not prepared by the Argentine State¹⁵³ and contained an express disclaimer that the Government of Argentina made no representation as to the accuracy, reliability or the completeness of the information it contained.¹⁵⁴

(e) The Tribunal made no analysis whatsoever of Argentina's arguments regarding the PPI matter,¹⁵⁵ and said that it "is persuaded" by the Claimants' approach without explaining why.¹⁵⁶

(f) The Tribunal took in isolation one Article of the Licence (which referred to the PPI) and did not pay any attention to other provisions that provided context for it.

(g) The Tribunal took into account the Bianchi Report, which was presented in violation of the rules of procedure.¹⁵⁷

(h) The Tribunal had no power to grant damages for the suspension of the PPI in 2000 and 2001 due to the Suspension Agreements, before the Emergency Law was enacted,¹⁵⁸ as they were voluntary agreements; this finding contradicted a separate finding of the Tribunal that the question of the Trust Fund and its operation, to which TGS had agreed, " cannot be a matter of complaint before it ".¹⁵⁹

(i) The Tribunal incorrectly found that the licensees only agreed to the suspension of the PPI-adjustment due to the fact that the amounts that would not be collected as a result of the suspension would be recovered later.¹⁶⁰

Tariff calculation in US dollars

(j) The Tribunal did not give reasons for rejecting Argentina's argument that Article 18(2) of the Licence, which prohibited the Grantor to change the licence except with express agreement of the Licensee, was a prohibition applying specifically to the Executive branch as the grantor of the Licence, and which did not apply to Legislative branch which adopted the Emergency Law, or the Judicial branch, which issued the injunction of 17 August 2000.¹⁶¹

(k) The Tribunal failed to consider certain arguments of Argentina, gave no reasons for rejecting certain arguments of Argentina, "counter-argued" against alleged arguments of Argentina which Argentina in fact never raised, discarded terms that were expressly agreed upon in the Licence, and gave no reasons for certain factual conclusions, thereby acting in an arbitrary fashion, failing to settle issues raised by the parties, and giving merely frivolous reasons.¹⁶²

(l) The Tribunal stated that " the Gas Decree and the Basic Rules of the License unequivocally refer to the calculation of tariffs in US dollars ", when the Gas Law makes no mention of tariffs calculations in US dollars.

(m) The English version of the Award does not mention the Gas Law, such that the Spanish and English versions contradict each other.

(n) The Tribunal did not provide reasons for rejecting the expert opinion of Professor Comadira, and the Tribunal did not even mention his report in Chapter IV of the Award.

The issue of TGS’s and CIESA’s financing policy

(o) The Tribunal did not decide on this allegation of Argentina and discarded Argentina's arguments without analysing them, and violated the principle of equality between the parties because it did consider the Claimants' arguments.¹⁶³

(p) The Tribunal's finding that no claim was made by ENARGAS that the policy followed by TGS might be contrary to the regulatory framework or the License¹⁶⁴ was false and contradictory.

Rejection of the theory of " imprevisión "

(q) By applying the concept of force majeure in compliance with Article 23 of the ILC Articles in its analysis of the theory of " imprevisión " under Argentine law, the Tribunal failed to apply the applicable law, which was Argentine law.

(r) The Tribunal did not analyse Professor Comadira's report on unforeseeability in Argentine law.

(s) The Tribunal did not apply the relevant domestic law, did not deal with the point in the Comadira Report as to the distinction between ordinary and extraordinary risk, and did not analyse the relevant point in the Roubini Report or the case law of the Argentine Supreme Court.

Liability under Argentine law

(t) The Tribunal failed to apply the applicable law in relation to Argentina's liability under domestic law.¹⁶⁵

(u) Professor Comadira's evidence as to the legality of the challenged measures under internal law were discarded for no reasons and remained unanalysed.

(v) The acceptance and use of Alberto Bianchi's report to support this core part of the Award constituted a serious violation of a rule of procedure.¹⁶⁶

(w) The Tribunal's analysis of the consistency between the challenged regulations and the internal law is faulty and leads to the nonapplication of the applicable law.¹⁶⁷

Interpretation of the Licence

Generally

(a) Argentina's claim is a disguised appeal on the merits of the case, and Argentina impermissibly seeks to reargue the merits of the issues.

PPI adjustments

(b) Argentina's claim seems to be an alleged inadequacy of reasons rather than their absence, which is not a basis for annulment, the requirement to provide reasons not being a duty to provide reasons that convince the losing party.¹⁶⁸

(c) In relying on a binding contractual provision (the Licence) in order to ascertain whether there was a right to the PPI tariff adjustment, the Tribunal satisfied the requirement of Article 52(1)(e) of the ICSID Convention, and its decision is consistent with other arbitration awards.¹⁶⁹

(d) The Tribunal further supported its decision by pointing to the provisions of the Gas Regulatory Framework, on which the License's provisions were based, and provided additional reasons based on the Government's previous practice, the terms of Decree 669/00, and the representations made in the Information Memorandum.¹⁷⁰

(e) The Tribunal did not state that Claimants based their investment decision on the terms of Decree 669/00, but simply pointed out that the Government's own statements in the decree confirmed the Tribunal's reading of the Gas Regulatory Framework.¹⁷¹

(f) The Tribunal cited the Information Memorandum as an element that also confirmed, rather than established, the Tribunal's conclusion,¹⁷² and whether it was legally binding is irrelevant. The Tribunal acknowledged that the Information Memorandum was prepared by private consultants and it contained a disclaimer regarding the Government's liability, but stated that if an error had been made in the statements in the Information Memorandum it would not have passed unnoticed by the Government, which had a duty to issue a clarification.¹⁷³

(g) The Tribunal correctly found that the Claimants were entitled to compensation based on the terms of the 2000 and 2001 suspension agreements as the Tribunal found that they were executed "in January and June 2000 on the basis that the amounts not collected as a result of the suspension would be recouped later and with interests".¹⁷⁴

Tariff calculation in US dollars

(h) The Tribunal devoted almost 50 paragraphs to analyzing the US dollar tariff issue,¹⁷⁵ and its reasoning provides a coherent basis for its decision on this issue.

(i) The Regulatory Framework granted a right to calculate the tariff in US dollars, and the same reasoning was followed by tribunals in other cases.¹⁷⁶

(j) The Tribunal analyzed and rejected Argentina's position regarding Section 18 of the License,¹⁷⁷ as did the Tribunal in the Sempra Award.¹⁷⁸

(k) Any discrepancy between the English and Spanish versions of the Award should have been made by Argentina the subject of the procedure under Article 49(2) of the ICSID Convention.

(l) The Tribunal has full discretion to assess the probative value of any evidence produced by the parties,¹⁷⁹ and the fact that the Award contains reasons different from those argued by Argentina's expert demonstrates the Tribunal's implicit rejection of the latter's position.

(m) The Tribunal's statement that in the context of a long period of economic turmoil, investors would not have been attracted to participate in the privatization process unless specific guarantees were provided in respect of the stability of their agreement,¹⁸⁰ is fully supported by the evidence in the record, and other tribunals on the same fact also reached the conclusion that US dollar tariffs were one of the main features of the Regulatory Framework.¹⁸¹

(n) The Tribunal duly dealt with Argentina's argument related to an alleged incompleteness of the Gas Regulatory framework.¹⁸²

(o) The Tribunal provided reasons for its interpretation of the Privatisation Committee minutes¹⁸³ that was identical to the conclusion reached in the Sempra Award,¹⁸⁴ and even if its interpretation were inaccurate, that would not provide grounds for annulment.

(p) The Tribunal did analyse Argentina's argument regarding "country risk",¹⁸⁵ and its findings are consistent with at least two other awards.¹⁸⁶

The issue of TGS’s and CIESA’s financing policy

(q) The Tribunal dealt with the financing policy issue in two different sections of the Award and expressly rejected Argentina's argument,¹⁸⁷ and in doing so, gave its reasons.

Rejection of the theory of " imprevisión "

(r) The Tribunal applied the BIT (which is also part of Argentina's domestic law) as lex specialis, complemented by customary international law where necessary, and these sources prevail over the law of the host State which plays a limited role in adjudicating the merits of a treaty dispute.¹⁸⁸ Article 23 of the ILC Articles was a valid source of law.¹⁸⁹

(s) After identifying the requirements for application of the theory, the Tribunal simply found that those conditions were not met in the present case.¹⁹⁰

Liability under Argentine law

(t) The Award includes an in-depth analysis of Claimants' rights under Argentine law and the subsequent impact of Argentina's measures on those rights,¹⁹¹ followed by a determination of the applicable standards for emergency situations established by the Argentine Supreme Court,¹⁹² followed by a finding that those requirements had not been met.¹⁹³

(u) The Tribunal did not apply the Civil Code, but supported its findings with the Gas Law, the Regulatory Framework and the License, which are part of Argentine administrative and regulatory law.¹⁹⁴

(v) Even if the Tribunal erred by applying the wrong law, which it did not, this would not constitute a manifest excess of power, since the outcome of the case would not have been different.

(w) Some Argentine case law which the Tribunal is said by Argentina not to have considered was not submitted as evidence to the Tribunal during the merits phase and therefore have no place in annulment proceedings,¹⁹⁵ and these cases were distinguishable and did not alter the basic principles in the case law cited by the Tribunal.

(x) It is sufficient that the Tribunal examined the parties' submissions on Argentine law and stated reasons since a more detailed review of the Tribunal's application of Argentine law is beyond the scope of this annulment proceeding.¹⁹⁶

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 applicable.

Each of [the] claims in this case was for an alleged breach of the BIT. The BIT is an international treaty between Argentina and the United States. By definition, a treaty is governed by international law, and not by municipal law. It is a fundamental principle that " [a] party may not invoke the provisions of its internal law as justification for its failure to perform a treaty ". In any claim for breach of an investment treaty, the question whether or not there has been a breach of the treaty must therefore be determined, not through the application of the municipal law of any State, but through the application of the terms of the treaty to the facts of the case, in accordance with general principles of international law, including principles of the international law of treaties. Bearing in mind that an investment treaty, whether bilateral or multilateral, is itself a source of international law as between the States parties to that treaty, the applicable law in any claim for a breach of that treaty can thus be said to be the treaty itself specifically, and international law generally.

Furthermore, in arbitration proceedings under the ICSID Convention, the tribunal also must comply with the terms of the ICSID Convention, which is also an international treaty to be interpreted and applied in accordance with general principles of international law, including principles of the international law of treaties.... [I]n a claim for breach of an investment treaty, the application by the tribunal of the terms of the investment treaty and of international law as the applicable law is foreseen by the words ''and such rules of international law as may be applicable" in Article 42(1) of the ICSID Convention.²⁰⁸

In some cases, it may be an express term of the investment treaty that the host State is required to comply with specified provisions of its own municipal law. In such cases, a breach by the host State of municipal law may thus amount to a breach of the treaty. Although municipal law does not as such form part of the law applicable to a claim for breach of a treaty, in such cases it may be necessary to determine whether there has been a breach of municipal law as a step in determining whether there has been a breach of the treaty....

However, even in this situation, municipal law would not thereby become part of the applicable law under Article 42 of the ICSID Convention for purposes of determining whether there was a breach of Article II.2(c) of the BIT. Rather, any breach of municipal law that might be established would be a fact or element to which the terms of the BIT and international law would be applied in order to determine whether there was a breach of Article II.2(c).²¹⁰

The Respondent is right in arguing that domestic law is not confined to the determination of factual questions. It has indeed a broader role, as it is evident in this very case from the pleadings and arguments of the parties that have relied heavily on the Gas Law and generally the regulatory framework of the gas industry, just as they have relied on many other rules of the Argentine legal system, including the Constitution, the Civil Code, specialized legislation and the decisions of courts. The License itself is governed by the legal order of the Argentine Republic and it must be interpreted in its light....

While on occasions writers and decisions have tended to consider the application of domestic law or international law as a kind of dichotomy, this is far from being the case. In fact, both have a complementary role to perform and this has begun to be recognized....

The Tribunal must also note that in examining the Argentine law as pertinent to various issues disputed by the parties, it finds that there is generally no inconsistency with international law as far as the basic principles governing the matter are concerned. The Tribunal will accordingly apply both Argentine law and international law to the extent pertinent and relevant to the decision of the various claims submitted.²¹¹

264. The measures in question in this case have beyond any doubt substantially changed the legal and business framework under which the investment was decided and implemented. Argentina in the early 1990s constructed a regulatory framework for the gas sector containing specific guarantees to attract foreign capital to an economy historically unstable and volatile. As part of this regulatory framework, Argentina guaranteed that tariffs would be calculated in US dollars, converted into pesos for billing purposes, adjusted semi-annually in accordance with the US PPI and sufficient to cover costs and a reasonable rate of return. It further guaranteed that tariffs would not be subject to freezing or price controls without compensation. Foreign investors were specifically targeted to invest in the privatization of public utilities in the gas sector. Substantial foreign investment was undertaken on the strength of such guarantees, including the investment made by Enron in TGS.

265. The Tribunal observes that it was in reliance upon the conditions established by the Respondent in the regulatory framework for the gas sector that Enron embarked on its investment in TGS. Given the scope of Argentina’s privatization process, its international marketing, and the statutory enshrinement of the tariff regime, Enron had reasonable grounds to rely on such conditions.

266. A decade later, however, the guarantees of the tariff regime that had seduced so many foreign investors, were dismantled. Where there was certainty and stability for investors, doubt and ambiguity are the order of the day. The long-term business outlook enabled by the tariff regime, has been transformed into a day-to-day discussion about what comes next. Tariffs have been frozen for almost five years. The recomposition of the tariff regime is subject to a protracted renegotiation process imposed on the public utilities that has failed to provide a final and definitive framework for the operation of business in the energy sector.

267. The Respondent might be right in distinguishing this case from the factual scenarios that recent decisions have faced, but this does not mean that Argentina’s acts are consistent with the meaning of the protection under the Treaty. It is clear that the ‘stable legal framework’ that induced the investment is no longer in place and that a definitive framework has not been made available for almost five years.

268. Even assuming that the Respondent was guided by the best of intentions, which the Tribunal has no reason to doubt, there is here an objective breach of the fair and equitable treatment due under the Treaty. The Tribunal thus holds that the standard established in Article II(2)(a) of the Treaty has not been observed and that to the extent that it results in a detriment to the Claimants’ rights it will give rise to compensation.

(a) as a matter of fact, Argentina constructed a regulatory framework for the gas sector containing specific guarantees to attract foreign capital to an economy historically unstable and volatile (paragraph 264);

(b) as a matter of fact, Enron undertook investment in Argentina (by investing in TGS) on the strength of those guarantees, and had reasonable grounds to rely on those guarantees (paragraphs 264-265);

(c) as a matter of fact, a decade later those guarantees were dismantled (paragraphs 266) and the "stable legal framework" that induced the investment was no longer in place (paragraph 267);

(d) as a matter of law, this amounted to a violation by Argentina to a breach of the fair and equitable treatment clause (paragraphs 267-268).

274. Under its ordinary meaning the phrase ‘any obligation’ refers to obligations regardless of their nature. Tribunals interpreting this expression have found it to cover both contractual obligations such as payment as well as obligations assumed through law or regulation. ‘Obligations’ covered by the ‘umbrella clause’ are nevertheless limited by their object: ‘with regard to investments’.

275. Through the Gas Law and its implementing legislation, the Respondent assumed ‘obligations with regard to investments’: tariffs calculated in US dollars converted to pesos for billing purposes, linked to the US PPI and sufficient to provide a reasonable rate of return were intended to establish a tariff regime that assured the influx of capital into the newly privatized companies such as TGS and ensured the value of such investment. The dismantling of these guarantees would suffice to establish a violation of the obligations entered into by the Respondent with regard to the Claimants’ investment.

276. In addition, the prohibition of price controls without indemnification and the prohibition of License amendments without consent, although contained in the License were also approved by decree and formed part of the implementing legislation that established the tariff regime. The obliteration of these commitments likewise entails a violation of obligations entered into by the Respondent with regard to the Claimants’ investment.

277. The Tribunal concludes accordingly that the breach of the obligations noted undertaken both under contract and law and regulation in respect of the investment have resulted in the breach of the protection provided under the umbrella clause of Article II(2)(c). [Footnotes omitted.]

(a) as a matter of fact, through the Gas Law and its implementing legislation, Argentina assumed obligations with regard to the Claimants' investment (paragraph 275);

(b) as a matter of fact, Argentina subsequently dismantled those guarantees, and this suffices to establish a violation of the umbrella clause (paragraphs 275-276); and

(d) as a matter of law, this amounted to a violation by Argentina to a breach of the umbrella clause (paragraphs 276-277).

The inescapable conclusion for the Tribunal to reach is that in considering the claims purely from the point of view of the Argentine legislation as one of the laws applicable to the dispute, the obligations which the Argentine Republic had and the commitments it undertook under the License were not observed. This is particularly significant in view that the License is expressly subject to Argentine law in some key respects, without prejudice to the effect that these legal arrangements have under the Treaty and international law. Liability is thus the consequence of such breach and there is no legal excuse under the Argentine legislation which could justify the non-compliance, as the very conditions set out by this legislation and the decisions of courts have not been met.²¹⁶

What Argentina... stated is that the Licence agreed to by TGS could not be unilaterally modified by the Executive branch, but that nonetheless it was expressly subject to regulation by Congress. This original agreement—this is, the possibility that the contract and the legal framework could be modified by a subsequent law—should have been part of the legitimate expectations of Enron and Ponderosa when investing in TGS. Therefore, in principle, the Licence being modified by a law from Congress could never have frustrated those legitimate expectations or constituted a violation of fair and equitable treatment.

153.... The Respondent has argued that as the prohibition of Clause 18.2 refers to the License not being modified by the Licensor, and the Licensor is the Executive Branch of Government, any measures or effects arising from congressional action, such as the Emergency Law, or from judicial decisions, such as the US PPI injunction, are not adopted by the Licensor and hence not envisaged in the prohibition of unilateral modification.

154. Ingenuous as this argument might be it is no more than a play of words because the Executive Branch binds the State in guaranteeing certain rights to foreign investors. Furthermore, quite evidently any State action, governmental, legislative or judicial, must respect the rights acquired under a contract. If contract rights were at the mercy of other branches of the State the rule of law, under both domestic and international law, would be seriously in jeopardy, a view which is not quite likely to be accepted in an arbitration which, at least in part, is governed by international law.

In order to facilitate the process of privatization, a Standard Gas Transportation License or "Model Licence" was approved by Decree 2255/92 including the applicable Basic Rules; all such rules were embodied in the License actually signed by TGS and the Government of Argentina and approved by Decree 2458/92. The duration of the License is of 35 years, leading up to 2027. An "Information Memorandum" concerning the privatization of Gas del Estado, the former State-owned transportation and distribution company, together with a "Pliego" explaining the bidding rules and the legal and contractual arrangements, were provided to prospective investors so as to organize the bidding process.

The Tribunal must first note that it is correct that Article 41 of the Gas Law, while providing for adjustment of tariffs in accordance with a formula based on international market indicators, also related this formula to the change in value of goods and services. The formula, however, was not defined under the Law. This task was left to the Basic Rules of the License, which provided in this connection that tariffs were to be adjusted semi-annually in accordance with the US PPI. This was also the information conveyed to investors by the Information Memorandum.²²¹

The Tribunal is persuaded that such understanding was also the Government’s view at the time and for almost a whole decade. This explains that Decree 669/00, dealing specifically with this mechanism, referred to the adjustment under it as a "legitimately acquired right", thus involving an unequivocal recognition of the existence of such a right.

(a) The Tribunal referred to,²²⁴ but gave no reasons for rejecting, Argentina's argument that the purpose of adjusting rates on the basis of a price index was not to guarantee profits in a foreign currency but to reflect the evolution of costs of public utility providers in the periods between periodical tariff recalculations.

(b) The Tribunal referred to,²²⁵ but gave no reasons for rejecting, Argentina's argument that there was a specific reason to adopt the chosen adjustment methods and that it became unreasonable to rely on those methods in the late 1990s when that reason no longer existed.

(c) The Tribunal, when dealing with the PPI-based adjustment issue, made no mention of relevant evidence of the expert Professor Nouriel Roubini and the witness Charles Massano, as if that evidence had not been presented.

(d) The Tribunal took in isolation one Article of the Licence (which referred to the PPI) and did not pay any attention to other provisions that provided context for it, such as the provisions to the effect that the adjustment methodology should reflect the changes in the value of goods and services, that the rate should guarantee the lowest cost for consumers that is compatible with the security of the facilities, and that the licence should be interpreted in accordance with Argentine law. Moreover, the Tribunal did not take into consideration relevant provisions of Argentina's Constitution, even though the Tribunal expressly acknowledged that the Licence was subject to the Argentine law.

Investment shall at all times be accorded fair and equitable treatment...

(a) The Tribunal took the wording of the preamble to the BIT, and turned it into a legal obligation to maintain a stable framework for investment for the parties as a fundamental element of fair and equitable treatment.²⁴²

(b) This interpretation amounts to a manifest excess of powers, since the preamble to the BIT does not establish such a legal obligation.²⁴³ Maintaining a stable legal system is substantially different from any obligation deriving from the BIT or the applicable international law, and by interpreting the standard of fair and equitable treatment in this way the Tribunal sought to create obligations for Argentina that did not derive from the BIT or the applicable international law, and did not resort to the applicable law for interpreting the fair and equitable treatment standard.²⁴⁴

(c) The Tribunal based its decision on a dictum in the Tecmed Award²⁴⁵ which was criticised in the MTD Annulment Decision.²⁴⁶

(d) The Tribunal's conclusion is absurd. A State has the right to enact, modify or cancel a law and an investor knows that laws will evolve over time.²⁴⁷

(e) In the proceedings before the Tribunal, Argentina objected to the Claimants' arguments as to the scope of the fair and equitable treatment standard, and consistently took the position that fair and equitable treatment means the minimum international standard.

(a) The Tribunal never determined that the preamble to the BIT establishes a legal obligation, but rightly concluded that stability of the legal framework is an element of the fair and equitable treatment standard. The Tribunal interpreted Article II(2)(a) of the BIT " in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of the object and purpose " as required by the Vienna Convention.²⁴⁸ During this exercise, the Tribunal "gave weight" to the preamble of the BIT,²⁴⁹ but did not conclude that the preamble itself established a legal obligation.

(b) The Tribunal relied on the BIT's language for the standard, looked to relevant case law for persuasive authority, and then evaluated Argentina's actions.²⁵⁰ It did not base its decision only on the Tecmed Award, which was cited in support of the standard provided by the BIT, not in substitution of it. The Tribunal discussed other tribunals' interpretation of the fair and equitable treatment standard.²⁵¹

(c) Throughout the merits phase, Argentina did not contest the Claimants' arguments that the fair and equitable treatment standard encompassed these requirements, and annulment is not the proper place for parties to reargue the merits of the case, under the guise of arguing that the Tribunal manifestly exceeded its powers.

(d) Numerous tribunals and legal scholars have confirmed that the protection of legitimate expectations is a key facet of the fair and equitable treatment standard²⁵² and Argentina cannot legitimately claim that the Tribunal somehow manifestly exceeded its power by drawing the same conclusion drawn by other tribunals.

(e) The Tribunal examined Argentina's actions and determined that they violated the obligation to protect an investor's legitimate expectations that Argentina undertook when it signed the BIT and enacted the relevant legal framework applicable to Claimants' investment.

(f) Argentina's arguments are merely disguised assaults on the Tribunal's conclusions.

(g) The Continental Casualty Award specifically acknowledged that there were significant factual and contextual differences in its case that caused it to differ from other awards. The CMS case could be viewed as a companion case to Claimants' case.²⁵³

(h) The Parkerings-Compagniet Award contradicts Argentina's position by recognizing that an investor's legitimate expectations must be protected. Unlike in that case, the present case has nothing to do with a lack of due diligence or the unreasonableness of the investor's expectations.

(i) The MTD Annulment Decision did not consider that the tribunal exceeded its powers by holding that the legitimate expectations of the investor were part of the fair and equitable treatment standard.²⁵⁴

The Respondent might be right in distinguishing this case from the factual scenarios that recent decisions have faced, but this does not mean that Argentina’s acts are consistent with the meaning of the protection under the Treaty. It is clear that the ‘stable legal framework’ that induced the investment is no longer in place and that a definitive framework has not been made available for almost five years.

Even assuming that the Respondent was guided by the best of intentions, which the Tribunal has no reason to doubt, there is here an objective breach of the fair and equitable treatment due under the Treaty. The Tribunal thus holds that the standard established in Article II(2)(a) of the Treaty has not been observed and that to the extent that it results in a detriment to the Claimants’ rights it will give rise to compensation.

Each Party shall observe any obligation it may have entered into with regard to investments.

(a) failed to state reasons for its conclusion, justifying annulment under Article 52(1)(e) of the ICSID Convention; and²⁶¹

(b) manifestly exceeded its powers, justifying annulment under Article 52(1)(b) of the ICSID Convention.

In relation to the ground of annulment in Article 52(1)(e) of the ICSID Convention

(a) The Tribunal's reasoning does not allow the reader to proceed from the existence of the umbrella clause in the BIT to the ruling against Argentina for alleged breaches of the provisions of the Licence to which the Claimants were not parties, and with regard to which they had no rights.²⁶²

(b) The Tribunal confined itself to making an inadequate description of other Tribunals' interpretations of the phrase " any obligations " contained in the umbrella clause and gave no grounds regarding the phrase " entered into " or the purported violation of the clause by Argentina.

(c) The present case is materially similar to that in the CMS Annulment Decision in which the ad hoc committee found that the tribunal had failed to analyse relevant issues²⁶³ and that " it is quite unclear how the Tribunal arrived at its conclusion ".²⁶⁴

(d) The Tribunal did not address the arguments of Argentina, in particular Argentina's argument as to the inexistence of an investment agreement or obligations with the Claimants.

In relation to the ground of annulment in Article 52(1)(b) of the ICSID Convention

(e) The Tribunal's analysis²⁶⁵ was based on only four decisions of arbitral tribunals,²⁶⁶ but in the cases relied on, except for the LG&E case, there were instruments expressly linking the investor to the host State. In the present case, Argentina never assumed any obligation vis à vis the Claimants other than the BIT.

(f) The expression "obligations" in the umbrella clause means specific obligations concerning the investment, and does not include general requirements imposed by the law of the host State.²⁶⁷ Contrary to what the Tribunal found,²⁶⁸ the Gas Law did not comprise any "specific obligations" with respect to the Claimants.

(g) The application of the umbrella clause is limited to commitments in investment contracts.²⁶⁹

(h) The License cannot be assimilated to an investment contract.²⁷⁰ There is no investment agreement in this case, since the Claimants did not enter into any agreement with the Argentine Government. Furthermore, the License lacked any element to internationalise it,²⁷¹ was regulated by Argentine law, was subject to local courts, and was granted to an Argentine company (TGS). Under Argentine Law and the License, Argentina was subject to obligations only towards TGS and not the Claimants, who had no right to enforce it.²⁷²

(i) Article VII of the BIT deals with "investment agreements". Argentina and the United States intended to attribute a special meaning to the term "investment agreement", and the special meaning should be observed.²⁷³ Under the BIT, in order for an investment agreement to exist, there must be an agreement between a party and a national or company of the other party. The definition of "investment treaty" of the 1994 US Model BIT was intended to broaden the notion of "investment agreement" and is inapplicable to the interpretation of the BIT.²⁷⁴

(j) It is inadmissible for the Claimants on the one hand to assert that they are not a party to the Licence and therefore are not bound by its forum clause, and on the other hand to claim that the Licence is an investment agreement entitling them to invoke the umbrella clause. The Tribunal followed the same contradictory reasoning.²⁷⁵

(k) The position in the Azurix case²⁷⁶ and CMS Annulment Decision²⁷⁷ was correct.

The measures in question in this case have beyond any doubt substantially changed the legal and business framework under which the investment was decided and implemented. Argentina in the early 1990s constructed a regulatory framework for the gas sector containing specific guarantees to attract foreign capital to an economy historically unstable and volatile. As part of this regulatory framework, Argentina guaranteed that tariffs would be calculated in US dollars, converted into pesos for billing purposes, adjusted semi-annually in accordance with the US PPI and sufficient to cover costs and a reasonable rate of return. It further guaranteed that tariffs would not be subject to freezing or price controls without compensation. Foreign investors were specifically targeted to invest in the privatization of public utilities in the gas sector. Substantial foreign investment was undertaken on the strength of such guarantees, including the investment made by Enron in TGS.

The Tribunal observes that it was in reliance upon the conditions established by the Respondent in the regulatory framework for the gas sector that Enron embarked on its investment in TGS. Given the scope of Argentina’s privatization process, its international marketing, and the statutory enshrinement of the tariff regime, Enron had reasonable grounds to rely on such conditions.

A decade later, however, the guarantees of the tariff regime that had seduced so many foreign investors, were dismantled. Where there was certainty and stability for investors, doubt and ambiguity are the order of the day. The long-term business outlook enabled by the tariff regime, has been transformed into a day-to-day discussion about what comes next. Tariffs have been frozen for almost five years. The recomposition of the tariff regime is subject to a protracted renegotiation process imposed on the public utilities that has failed to provide a final and definitive framework for the operation of business in the energy sector.

The Respondent might be right in distinguishing this case from the factual scenarios that recent decisions have faced, but this does not mean that Argentina’s acts are consistent with the meaning of the protection under the Treaty. It is clear that the ‘stable legal framework’ that induced the investment is no longer in place and that a definitive framework has not been made available for almost five years.

The dismantling of these guarantees [under the Gas Law and its implementing legislation] would suffice to establish a violation of the obligations entered into by the Respondent with regard to the Claimants’ investment.

In addition, the prohibition of price controls without indemnification and the prohibition of License amendments without consent, although contained in the License were also approved by decree and formed part of the implementing legislation that established the tariff regime.

The obliteration of these commitments likewise entails a violation of obligations entered into by the Respondent with regard to the Claimants’ investment.

The Committee considers it sufficiently clear from the wording of this paragraph that the Tribunal did not consider a violation of the Licence itself to be a breach of the umbrella clause. Rather, the Tribunal found that the terms of the Licence formed part of the implementing legislation, such that a violation of the provisions of the Licence referred to in this paragraph also amounted to a violation of the guarantees contained in the legislative framework.

... CMS relied on a literal interpretation of Article II(2)(c). It contended that Argentina entered into legal obligations under the License, which were obligations "with regard to investments" under that Article. Although CMS was not entitled as a minority shareholder to invoke those obligations of Argentina under Argentine law (not being the obligee), the effect of Article II(2)(c) was to give it standing to invoke them under the BIT.²⁹⁴