Avocats, autres représentants, expert(s), secrétaire du tribunal

Decision on the Claimants’ Second Request to Lift Provisional Stay of Enforcement of the Award

A. Introduction

1.
On February 21, 2008, the Argentine Republic ("Argentina") filed with the Secretary-General of the International Centre for Settlement of Investment Disputes ("ICSID") an application in writing (the "Application for Annulment") requesting the annulment of the Award of May 22, 2007 (the "Award"), rendered by the tribunal (the "Tribunal") in the arbitration proceeding between Enron Corporation and Ponderosa Assets, L.P. (the "Claimants") and Argentina.
2.
The Application for Annulment contained a request, under Article 52(5) of the ICSID Convention and Rule 54(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the "ICSID Arbitration Rules"), for a stay of enforcement of the Award until the Application for Annulment is decided.
3.
By letter of May 22, 2008, in accordance with Rule 52(2) of the ICSID Arbitration Rules, the parties were notified by the Centre that an ad hoc Committee ("the Committee") had been constituted, composed of Dr. Gavan Griffith Q.C., a national of Australia, Judge Patrick L. Robinson, a national of Jamaica, and Judge Per Tresselt, a national of Norway.
4.
On June 18, 2008, the Claimants filed a request to lift the provisional stay of enforcement of the award, or alternatively, to condition a continuation of the stay on Argentina’s posting of adequate security.
5.
Having received the parties’ written observations on the Claimants’ request and having heard the parties on the matter at the first session of the Committee held on July 14, 2008, on October 7, 2008, the Committee issued its "Decision on the Argentine Republic’s Request for a Continued Stay of Enforcement of the Award" (the "First Stay Decision").
7.
By letter of December 17, 2008, the Claimants requested the Committee to end the stay of enforcement of the Award, or in the alternative, to condition such a stay on Argentina’s provision of adequate financial security in the form of a bank guarantee or its monetary equivalent. That letter maintained that although the Committee had afforded Argentina 60 days to reconsider its position, Argentina had failed to do so.
8.
By letter of December 19, 2008, the parties were advised that the Committee was minded to accept the Claimants’ letter of December 17, 2008 as an application for alternative orders, and Argentina was invited to comment upon this proposal. The parties were also advised that upon the Committee’s acceptance of the proposal, the parties would be directed to exchange submissions.
9.
By a letter of December 30, 2008 with attachments, Argentina requested leave of the Committee to develop its position on evidence and arguments which were not originally before the Committee, and requested that a hearing be held to discuss new reasons that should dispel doubts that Argentina will comply with its obligations under the ICSID Convention. Arguments in this respect were presented in the letter.
10.
By a letter of January 7, 2009, the Claimants maintained that Argentina’s letter of December 30, 2008, instead of simply commenting on the Committee’s proposal to treat the Claimants’ request as a formal application, constituted a "full-blown anticipatory reply submission". The letter requested the Committee to treat Argentina’s letter as its further contentions in support and to decline any further exchange of submissions. The letter further opposed Argentina’s request for leave to develop its position on additional evidence and arguments. The letter then responded to the points raised in Argentina’s letter, and stated that the Claimants considered a further hearing to be unwarranted.
11.
By a letter from the Centre dated January 8, 2009 the parties were informed that the Committee agreed to grant the requested hearing.
12.
By a letter of February 20, 2009, Argentina provided a number of additional documents which it stated would be used at the hearing.
13.
Following other exchanges concerning the timing and modalities, on March 9, 2009, a hearing was held in Paris at which the parties presented oral submissions on this second application by the Claimants to lift the stay of enforcement of the Award, or to condition the continuation of the stay on Argentina’s provision of adequate financial security.
14.
At the conclusion of that hearing, the Chairman announced orally the Committee’s decision. The Chairman recalled the terms of paragraph 103 of the First Stay Decision, which stated:

The Committee notes that in no event would it be minded to lift the stay of enforcement of the award or to make security a condition of a continuation of the stay without arrangements being put in place to ensure that any amounts recovered by, or any security provided to, the Claimants would be recoverable by Argentina in the event that the Award is annulled.

The Chairman stated that the Committee had concluded that this necessary part of the application for the stay to be lifted had not yet been satisfied. The Chairman announced that in the circumstances the Committee had decided, without taking any view on the other issues that had been raised, to adjourn the matter of the lifting of the stay to give the Claimants an opportunity to bring forward a proposal, on notice to Argentina, which would make provision to ensure that any amounts recovered by or any security provided to the Claimants would be recoverable by Argentina in the event that the Award is annulled. The Chairman went on to state that such provision should:

... eliminate the risk of third party execution or garnishee so that Argentina would not in fact recover the monies. The Committee takes the view that it is no function of establishing an account for escrow to give some third party a windfall fund to execute against..., and... the possibility of third party benefit is to be eliminated.

15.
In a letter dated March 30, 2009 with attachments, the Claimants presented three proposals addressing the issues in paragraph 103 of the First Stay Decision. That letter also commented on the concern expressed by Argentina that because Enron Corp is in bankruptcy, there is a risk that any secured funds could potentially be attached by Enron’s creditors.
16.
By a letter dated April 7, 2009 with attachments, Argentina responded to the matters raised in the Claimants’ letter of March 30, 2009.
17.
By a letter dated April 13, 2009 with attachments, the Claimants addressed Argentina’s letter of April 7, 2009.
18.
By a letter dated April 21, 2009 with attachments, Argentina responded to the Claimants’ letter of April 13, 2009.
19.
By a letter dated April 27, 2009, the Claimants replied to Argentina’s letter of April 21,2009.
20.
At the hearing on March 9, 2009, Argentina remarked that it appeared from Enron’s website that its name had been changed to Enron Creditors Recovery Corp., and the Committee requested Enron’s counsel to confirm this. In their letter of March 30, 2009, counsel for the Claimants confirmed that Enron’s name had indeed been changed to Enron Creditors Recovery Corp, in March 2007. In its letter of April 7, 2009, Argentina requested that the name of the case be changed to reflect Enron’s change of name. In their letter of April 13, 2009, counsel for the Claimants said that the Claimants did not oppose the request by Argentina for the case name to be changed.

B. The parties’ contentions

22.
Argentina argues, inter alia'.

(a) There is additional support for Argentina’s position that an ICSID award creditor may be required to follow the enforcement procedures under Argentine law to which Article 54 of the ICSID Convention refers.17

(b) The only thing that the award creditor has to do is complete the formalities applicable to compliance with final judgments of local courts, if any apply in the State in question, which in the case of Argentina are essentially before administrative authorities, in this case the Ministry of Economy, within the context of an enforcement judicial proceeding, in which the judge restrains himself to checking compliance with the award.

(c) Article 27 of the ICSID Convention constitutes the best proof of Argentina’s position on recognition and enforcement.

(d) In other cases, compliance by States with ICSID awards has taken six months or a year, and lawyers for claimants have accepted that there are procedures that States must go through to execute payments.

(e) For purposes of execution of the Award, the issue of Enron’s bankruptcy status is not a mere formality. Creditors may attach assets that were attached or obtained by Enron during the annulment proceeding, which assets may never be recouped by Argentina even if it prevailed in the annulment.

(f) Serious doubts remain as to the ability of the Claimants’ counsel, under the arrangements within Enron’s bankruptcy proceedings regarding this ICSID claim, to cause Enron to renounce certain rights it may have as to the execution of the Award.

(g) The costs of setting up the escrow arrangement or letter of credit in the Claimants’ first two proposals would be so high as to render them impracticable.

(h) BNA is an Argentine commercial banking institution created by the Argentine legislature, which operates independently from and is not controlled by Argentina. Under Article 25 of its charter, it is prohibited from lending to the Federal Government, except when a special guarantee is constituted that allows for the automatic reimbursement of the money, which in this case would mean that Argentina would have to constitute an escrow account for the total amount of the award.

(i) Each of Proposals 1 and 2 creates unacceptable risks of attachment. In the event that Argentina prevails in the annulment proceeding, Argentina will have the right to receive back the property in the escrow account, or collateral funds returnable to it. Judgment creditors of Argentina will accordingly argue that they have a right to attach Argentina’s right to receive the property in the event that Argentina prevails in the annulment proceeding.

(j) Requiring Argentina to incur such exorbitant costs in order to run the risk of losing probably millions of dollars even if it prevailed in the annulment is not justified. Even if Argentina’s position is not shared, at the end of the day all that Argentina is requiring is that ICSID award creditors follow a formal procedure almost exclusively before administrative authorities, something that has been successfully required by other States.

C. The Committee’s views

23.
The Committee found that at the time of the First Stay Decision, in the event that the Award is not annulled, it was Argentina’s intention not to pay the Award forthwith but to require the Claimants to bring proceedings for the enforcement of the Award under the provisions of Argentine law that give effect to Article 54 of the ICSID Convention.18 The First Stay Decision found that this would amount to non-compliance with Argentina’s obligations under Article Vll(6) of the BIT and Article 53(1) of the ICSID Convention.19
24.
In its letter of December 30, 2008 and at the oral hearing on March 9, 2009, Argentina presented arguments that challenged the Committee’s decision in this respect. However, nothing in the First Stay Decision suggested that Argentina would be given an opportunity to reopen matters decided by the Committee in that decision in the event that the Claimants were to make a further application to lift the stay or to require security as a condition for continuation of the stay. The Committee considers that it would be wrong in principle for it to reopen matters that were dealt with in the First Stay Decision, and it declines to do so.
25.
For completeness the Committee also notes that two more recent decisions in ICSID annulment proceedings are, contrary to Argentina’s submissions, consistent with the Committee’s conclusion in the First Stay Decision on this issue.

(1) In the Vivendi case, the ad hoc committee stated that:

In the opinion of the Committee, it would be contrary to the interpretation provisions of the Vienna Convention on the Law of Treaties to pretend that any organ of the host State can extend an administrative certification function to exercise any possible control over the enforcement process of pecuniary obligations under a finally binding ICSID award. Such activity would contradict the declared objectives of the ICSID Convention. Any possible intervention by a judicial authority in the host State is unacceptable under the ICSID Convention, as it would render the awards simply a piece of paper deprived from any legal value and dependent on the will of state organs.20

The ad hoc committee went on in that decision to note that "Argentina’s legal position in this respect... does not conform entirely with the Committee’s understanding of the interrelationship between Articles 53 and 54".21

(2) Subsequently, in the Sempra case, the ad hoc committee concluded that:

... a State Party against which an award has been made must (like a foreign investor party) abide by and comply with an ICSID award without the award creditor having to submit to any agency of the State Party to enforce the award as envisaged by Article 54 of the ICSID Convention.... The very fact that the Committee has found that Argentina is under a duty, unconditionally and in good faith, to "abide by and comply with’’ the Award according to Article 53, together with Argentina’s repeated and uncompromising affirmation that it has no such obligation in the absence of the award creditor submitting the award to a procedure within the State party’s domestic judicial system under Article 54, must necessarily lead to the conclusion that Argentina is not willing to comply with its obligations under Article 53 unless Sempra first seeks enforcement under Article 54.22

26.
In the First Stay Decision the Committee also found that a relevant consideration in deciding whether or not to grant a stay, or whether or not to make any stay conditional on the provision of security, is whether the party opposing the stay has established circumstances of sufficient doubt as to whether there will be compliance with ICSID Convention obligations on a final award in the event that it is not annulled.23
27.
The First Stay Decision concluded that:

... in the absence of any indication by Argentina that it has changed its position to accord with that which the Committee has found as to the extent of the obligations under the BIT and the ICSID Convention, the Committee would be minded, again absent contrary arguments and evidence, to consider that there is a risk of non-compliance by Argentina with its obligations under Article 53 of the ICSID Convention if the Award is not annulled.24

28.
As noted above, the Committee said that it would not assume that Argentina would continue to maintain its position following the reasons in the First Stay Decision, and that Argentina was to be given an opportunity to reconsider its position.25 In the event, upon this new application to lift the provisional stay, Argentina has not suggested that it has changed its position in the light of the Committee’s reasons in the First Stay Decision. At the hearing on March 9, 2009, counsel for Argentina stated that:

What we state is that, again, Article 53 establishes an obligation to comply with ICSID awards. And we say that they are voluntary in the sense that the debtor does not have to be forced to comply with an ICSID award. What we state is that the ICSID creditor as [sic] to follow the formalities applicable under domestic law for compliance with final judgments of local courts. This is what Article 54 requires.26

In the letter of April 7, 2009, Argentina’s legal representatives appear to have maintained this position, stating that:

Even if Argentina’s position regarding the way in which ICSID awards are to be complied with were not shared, which is the case of this ad hoc Committee, at the end of the day all that Argentina is requiring is that ICSID creditors follow a formal procedure almost exclusively before administrative authorities...

On the basis of the material before it, the Committee is satisfied that Argentina has not changed its position that if the Award in this case is not annulled, Argentina will not comply with the Award without requiring the Claimants to bring proceedings for the enforcement of the Award under the provisions of Argentine law that give effect to Article 54 of the ICSID Convention.

29.
For these reasons, the Committee is satisfied that presently there is a high risk of non-compliance by Argentina with its obligations under Article 53 of the ICSID Convention if the Award is not annulled.
30.
Argentina maintains that the cost to it of providing security would be prohibitive. In the First Stay Decision, the Committee found that if there is a serious risk of non-compliance with the award in the future, hardship to the award debtor in providing security should not normally be a factor of significance, any more than hardship could be a factor excusing non-compliance with the award itself if not annulled.27 However, the Committee left open the possibility that such hardship may be one factor to be taken into account with other factors in exceptional circumstances, such as where the provision of security would have "‘catastrophic’, immediate and irreversible consequences" for a party’s ability to conduct its affairs, or would severely affect the interests of the party.28
31.
Argentina relies on evidence of Mr Daniel Marx, a partner in a financial advisory firm based in Argentina and former Secretary of Finance of Argentina, to the effect that the cost to Argentina of either Proposal 1 or Proposal 2 would be prohibitive. The Claimants have sought to dispute this.
32.
In light of the reasons which follow, the Committee finds that it is not necessary for it to determine what would realistically be the cost to Argentina of either Proposal 1 or Proposal 2, or to determine whether that cost could be considered to be so high as to constitute exceptional circumstances of the kind referred to in paragraph 30 above.
34.
Argentina also questions the authority of the CIESA/TGS Manager and the Claimants’ counsel to make representations on Enron’s behalf in relation to the Claimants’ proposals. On the basis of the material before it and the submissions of the Claimants, the Committee is satisfied as to the authority of CIESA/TGS Manager and the Claimants’ counsel in this respect.
43.
Against this, the Committee has given weighty consideration to the effect that it may have on confidence in the ICSID system if a stay of enforcement is continued in force throughout annulment proceedings, notwithstanding that there is a high risk of non-compliance by the respondent State with its obligations under Article 53 of the ICSID Convention if the Award is not annulled.
44.
In balancing the competing considerations, the Committee has also taken into account that in the Sempra Stay Decision, the ad hoc committee ultimately decided to impose a condition of security, not for the full amount of the award, but for a portion of the award as a "tangible demonstration of good faith" on the part of Argentina.31 However, it is not clear to the Committee what is the basis in principle for such a condition of only partial security. Furthermore, the Committee considers that the risk in this case of irrecoverability would apply to partial security in the same way as it would to security for the full amount of the Award.

DECISION

The ad hoc Committee decides that pursuant to Article 52(5) of the ICSID Convention and Rule 54(2) of the ICSID Arbitration Rules, the stay of enforcement of the Award will continue in effect for the duration of these annulment proceedings.
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