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

Decision on Jurisdiction and Liability

II. INTRODUCTION AND THE PARTIES

1.
The Claimants are Mobil Exploration and Development Argentina Inc. Suc. Argentina ("MEDA") and Mobil Argentina Sociedad Anónima ("MASA") collectively referred to as the "Claimants."
2.
The Respondent is the Argentine Republic and is hereinafter referred to as "GOA", the "Government of Argentina", "Argentina" or the "Respondent."
3.
The Claimant and the Respondent are hereinafter collectively referred to as the"Parties."

III. PROCEDURAL HISTORY

4.
On 19 December 2003, the Claimants filed a Request for Arbitration (the "Request" or "RFA") against the Argentine Republic with the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre"). The Request was filed pursuant to the Treaty Concerning the Reciprocal Encouragement and Protection of Investment between Argentina and the United States of America (the "BIT") and pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, dated 14 October 1966 ("ICSID Convention").
5.
According to the Request, the dispute arose from the Claimant’s alleged investment in Argentina. The Claimant alleges that Argentina has failed to comply with the rights and guarantees granted to investors by the terms of the BIT, international law and the local laws.
6.
On 5 August 2004, the Secretary-General registered the Request for Arbitration. The Claimants further filed two ancillary claims, a first ancillary claim on 14 February 2006 ("First Ancillary Claim") and a second ancillary claim on 23 October 2007 "Second Ancillary Claim").
7.
On 27 July 2005, the Claimants appointed Professor. Piero Bernardini, an Italian national, as arbitrator. On 17 August 2005, the Argentine Republic appointed Professor. Alain Pellet, a national of France, as arbitrator. Prof. Pellet subsequently resigned. On 31 August 2006 the Argentine Republic appointed Prof. Antonio Remiro Brotóns, a national of Spain, as arbitrator. On 31 July 2008, in accordance with Rule 4 of the Rules of Procedure for Arbitration Proceedings (the "Arbitration Rules"), the Chairman of the Administrative Council of ICSID appointed Justice Gustaf Moller, a Finnish national, as President of the Tribunal. On August 14, 2008, the Deputy Secretary-General of ICSID informed the Parties that all Members of the Tribunal had accepted their appointments and that, in accordance with Arbitration Rule 6(1), the Tribunal was deemed to have been constituted on that same day.
8.
On 3 October 2008, the Tribunal held its first session by telephone conference. During the first session the Parties confirmed that the Tribunal had been properly constituted in accordance with the ICSID Convention and the applicable ICSID Arbitration Rules. Additionally the Tribunal and the Parties agreed on the procedural calendar.
9.
The Claimants filed a Memorial on the Merits on 16 February 2009. On 14 May 2009 the Respondent filed a Memorial on Jurisdiction. The Claimants filed a Countermemorial on Jurisdiction on 31 July 2009. On 7 December 2009 the Respondent filed a Counter-Memorial on the Merits. On 27 April 2010 Claimants filed a Reply on the Merits. Respondent filed a Rejoinder on the Merits on 6 September 2010.
10.
The hearing on jurisdiction and merits was held from 1 April 2011 through 13 April 2011 at the seat of the Centre in Washington D.C. Present at the hearing were:

Members of the Tribunal:

Justice Gustaf Moller, President of the Tribunal

Professor Piero Bernardini, Arbitrator

Professor Antonio Remiro Brotóns, Arbitrator

ICSID Secretariat

Ms. Natali Sequeira Secretary of the Tribunal

Assistant to Prof. Remiro Brotóns

Professor Irene Blásquez Navarro

On behalf of the Claimants:

Ms. Kimberly Pilcher ExxonMobil Corp.

Mr. Gene Silva ExxonMobil Corp.

Mr. Mariano Vivas de Lorenzi ExxonMobil Corp

Mr. R. Doak Bishop King & Spalding LLP

Mr. Craig S. Miles King & Spalding LLP

Mr. Guillermo Aguilar Alvarez King & Spalding LLP

Mr. José A. Martínez de Hoz Pérez Alati, Grondona, Benites,

Amsten & Martínez de Hoz (PAGBAM)

Ms. Valeria Macchia PAGBAM

Ms. Silvia Marchili King & Spalding LLP

Mr. David Weiss King & Spalding LLP

Mr. Gustavo Topalián PAGBAM

Ms. Jimena Vega Olmos PAGBAM

Mr. Alex Maculus PAGBAM

Ms. María Florencia Villaggi PAGBAM

Ms. Adriana Forno PAGBAM

Mr. Tim Kistner King & Spalding LLP

Ms. Carol D. Tamez King & Spalding LLP

Claimants’ Witnesses

Ms. Norma Valle ExxonMobil Corp.

Mr. Dub Crook III ExxonMobil Corp.

Claimants’ Experts

Prof. Michael Reisman Yale Law School

Prof. José Alvarez New York University Law School

Prof. Sebastian Edwards, Ph.D. University of California, Los Angeles

Mr. Rudolf DolzerDirector German Society of Foreign Policy Berlin

Mr. Keith McLeod Sproule

Ms. Nora T. Stewart Sproule

Phillip W. Pantella Sproule

Mr. Pablo Spiller LECG

Mr. Manuel Abdala LECG

Mr. Diego Bondorevsky LECG

Mr. Miguel Nakhle LECG

Ms. Maria Lombardi LECG

Mr. Ariel Medvedeff LECG

Mr. Alberto B. Bianchi Estudio Bianchi & Galarce

Mr. Julio César Rivera Julio César Rivera Abogados

Mr. Guillermo O. Teijeiro Negri & Teijeiro, Abogados

Mr. Carlos Manuel Bastos Independent Consultant

Mr. Hugo Martelli Martelli Abogados

On behalf of the Respondent:

Dirección Nacional de Asuntos y Controversias Internacionales

Procuración del Tesoro de la Nación

Dr. Horacio Pedro Diez Subprocurador del Tesoro de la Nación

Dr. Gabriel Bottini Director

Dra. Adriana Busto Subdirector

Dra. Gisela Makowski Procuración del Tesoro de la Nación

Dr. Tomás Braceras Procuración del Tesoro de la Nación

Dr. Rodrigo Ruiz Esquide Procuración del Tesoro de la

NaciónDra. Viviana Kluger Procuración del Tesoro de la Nación

Dr. Matías Bietti Procuración del Tesoro de la Nación

Dra. Verónica Lavista Procuración del Tesoro de la Nación

Dr. Ignacio Torterola Procuración del Tesoro de la Nación

Dr. Ignacio Pérez Cortés Procuración del Tesoro de la Nación

Lic. Nicolás Grosse Procuración del Tesoro de la Nación

Lic. Patricio Arnedo Barreiroq Procuración del Tesoro de la Nación

Dr. Diego Gosis Procuración del Tesoro de la Nación

Mr. Nicolás Duhalde Procuración del Tesoro de la Nación

Mr. Julián Santiago Negro Procuración del Tesoro de la Nación

Ms. M. Soledad Romero Caporale Procuración del Tesoro de la Nación

Secretaria de Energia de la Nación

Dr. Carlos Bernardo Walter Kunz Asesor legal

Lic. Charles Massano Asesor

Respondent’s Witnesses:

Mr. Eduardo Ratti

Mr. Daniel Cameron

Mr. Diego Guichón

Respondent’s Experts:

Mr. Ismael Mata

Mr. Norberto E. Noblia

Mr. Guillermo Rodríguez Usé

Mr. Esteban Greco

Mr. Ernesto Schargrodsky Universidad Torcuato Di Tella

Mr. Guido Sandleris Universidad Torcuato Di Tella

Mr. Nicolás Gadano Universidad Torcuato Di Tella

Ms. Julieta Serna Universidad Torcuato Di Tella

Mr. Sebastián González

Mr. Francisco Gulisano Diamondstar S.R.L.

Mr. César Garrasino Diamondstar S.R.L.

Mr. Benedict Kingsbury

Mr. Barry Eichengreen

Mr. Roberto Frenkel

Mr. Mario E. Damill

Mr. Nouriel Roubini

Ms. Liliana de Riz

Ms. Monica Pinto

11.
As instructed by the Tribunal the last day of the hearing, the Parties submitted on 23 May 2011, corrections to the transcripts. On 13 June 2011 the Parties filed simultaneous post-hearing briefs. On 12 July 2011 the Tribunal received the parties’ statements of costs.
12.
On 4 May 2012, the parties were informed that the Tribunal had decided to bifurcate the proceedings by first issuing a decision on liability and postponing the quantification of damages to a separate quantum phase.

IV. THE INVESTMENT PROTECTION TREATY

13.
The BIT was signed on 14 November 1991 and entered into force on 13 October 1993. It is drafted in English and Spanish and contains, inter alia the following provisions:

"ARTICLE I

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;

b) "company" of a Party means any kind of corporation, company, association, state enterprise, or other organization, legally constituted under the laws and regulations of a Party or a political subdivision thereof whether or not organized for pecuniary gain, and whether privately or governmentally owned;

c) "national" of a Party means a natural person who is a national of a Party under its applicable law;

d) "return" means an amount derived from or associated with an investment, including profit; dividend; interest; capita gain; royalty payment; management, technical assistance or other fee; or returns in kind;

e) "associated activities" include the organization, control, operation, maintenance and disposition of companies, branches, agencies, offices, factories or other facilities for the conduct of business; the making, performance and enforcement of contracts; the acquisition, use, protection and disposition of property of all kinds including intellectual and industrial property rights; and the borrowing of funds, the purchase, issuance, and sale of equity shares and other securities, and the purchase of foreign exchange for imports.

f) "territory" means the territory of the United States or the Argentine Republic, including the territorial sea established in accordance with international law as reflected in the 1982 United Nations Convention on the Law of the Sea. This Treaty also applies in the seas and seabed adjacent to the territorial sea in which the United States or the Argentine Republic has sovereign rights or jurisdiction in accordance with international law as reflected in the 1982 United Nations Convention on the Law of the Sea.

(...)

3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.

ARTICLE II

1. Each Party shall permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country, whichever is the more favorable, subject to the right of each Party to make or maintain exceptions falling within one of the sectors or matters listed in the Protocol to this Treaty.

2. a) Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law.

b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For the purposes of dispute resolution under Articles VII and VIII, a measure may be arbitrary or discriminatory notwithstanding the opportunity to review such measure in the courts or administrative tribunals of a Party.

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

(...)

6. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investments, investment agreements, and investment authorizations.

(...)

ARTICLE IV

1. Investments shall not be expropriated or nationalized through measures tantamount to expropriation or nationalization ('expropriation’) except for a public purpose; in a non-discriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II (2) Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be paid without delay; include interest at a commercially reasonable rate from the date of expropriation; be fully realizable; and be freely transferable at the prevailing market rate of exchange on the date of expropriation.

2. A national or company of either Party that asserts that all or part of its investment has been expropriated shall have a right to prompt review by the appropriate judicial or administrative authorities of the other Party to determine whether any such expropriation has occurred and, if so, whether such expropriation, and any compensation therefore, conforms to the provisions of this Treaty and the principles of international law.

3. Nationals or companies of either Party whose investments suffer losses in the territory of the other Party owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events shall be accorded treatment by such other Party no less favorable than that accorded to its own nationals or companies or to nationals or companies of any third country, whichever is the more favorable treatment, as regards any measures it adopts in relation to such losses

(...)

ARTICLE VII

1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party's foreign investment authority (if any such authorization exists) to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

2. In the event of an investment dispute, the parties to the dispute should initially seek a resolution through consultation and negotiation. If the dispute cannot be settled amicably, the national or company concerned may choose to submit the dispute for resolution:

(a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

(b) in accordance with any applicable, previously agreed disputesettlement procedures; or

(c) in accordance with the terms of paragraph 3.

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b) and that six months have elapsed from the date on which the dispute arose, the national or company concerned may choose to consent in writing to the submission of the dispute for settlement by binding arbitration:

(i) to the International Centre for the Settlement of Investment Disputes ("Centre") established by the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington, March 18, 1965 ("ICSID Convention"), provided that the Party is a party to such convention: or

(ii) to the Additional Facility of the Centre, if the Centre is not available; or

(iii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNICTRAL): or

(iv) to any other arbitration institution, or in accordance with any other arbitration rules, as may be mutually agreed between the parties to the dispute.

(b) Once the national or company concerned has so consented, either party to the dispute may initiate arbitration in accordance with the choice so specified in the consent

4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice specified in the written consent of the national or company under paragraph 3. Such consent, together with the written consent of the national or company when given under paragraph 3 shall satisfy the requirement for

(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (Jurisdiction of the Centre) and for purposes of the Additional Facility Rules; and

(b) an "agreement in writing" for purposes of Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958 ("New York Convention").

5. Any arbitration under paragraph 3(a) (ii), (iii)) or (iv) of this Article shall be held in a state that is a party to the New York Convention.

6. Any arbitral award rendered pursuant to this Article shall be final and binding on the parties to the dispute. Each Party undertakes to carry out without delay the provisions of any such award and to provide in its territory for its enforcement

7. In any proceeding involving an investment dispute, a Party shall not assert, as a defense, counterclaim, right of set-off or otherwise, that the national or company concerned has received or will receive, pursuant to an insurance or guarantee contract, indemnification or other compensation for all or part of its alleged damage.

8. For purposes of an arbitration held under paragraph 3 of this Article, any company legally constituted under the applicable laws and regulations of a Party or a political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall be treated as a national or company of such other Party in accordance with Article 25(2) (b) of the ICSID Convention.

ARTICLE XI

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

ARTICLE XII

1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty, and in particular Article VII and VIII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article IV;

(b) transfers, pursuant to Article V; or

(c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article VII(1)(a) or (b),

to the extent they are not subject to the dispute settlement provisions of a Convention for the avoidance of double taxation between the two Parties, or have been raised under such settlement provisions and are not resolved within a reasonable period of time.

ARTICLE XIII

This Treaty shall apply to the political subdivisions of the Parties."

V. FACTUAL BACKGROUND

A. The Origins of the Dispute

14.
The Argentine economy entering the 1990s was facing serious problems. Therefore Argentina needed to implement a dramatic change. First, in an effort to end currency instability that hindered Argentina’s chances of attracting foreign investment, Argentina enacted Law 23,928 (together with its implementing Decree 529/91, (the "Convertibility Law") in 1991.1 Pursuant to the Convertibility Law, Argentina pegged the local currency (the "Peso") to US Dollar at a fixed rate of 1:1.
15.
Second, Law 23,696 (the "State Reform Law") provided for the unbundling and eventual privatization of public assets.2 A main purpose of the State Reform Law was to promote foreign investment in the hydrocarbon industry, thereby stimulating oil and gas drilling, increasing reserve, and transforming Argentina from a net importer to a net exporter of hydrocarbons.3 Revamped laws and decrees relating to investment - especially Decree 1853/93 - constituted another pillar of economic reform.4
16.
By the 1980s, the GOA almost completely owned, and to a substantial extent operated, the entire energy sector. In the case of the Argentine oil and gas industry, the public sector dominated the exploration, production, development, transportation, refining, and distribution of hydrocarbons. The private sector played only a secondary role, restricted to activities and service contracts with Yacimientos Petrolíferos Fiscales S.E. ("YPF"), the former state-owned oil company, and with Gas del Estado Sociedad del Estado ("Gas del Estado"), which owned and operated the gas transportation and distribution system. Oil and gas exploration and development activities were in critical decline.
17.
During the mid-1980s, Argentina attempted to attract foreign investment to the oil and gas industry. It launched a program named the "Houston Plan" with a view to concluding service contracts between YPF and foreign companies. The main purpose of this project was to increase Argentina’s oil and gas reserves and achieve energy surpluses by increasing oil and gas exploration.5
18.
Under this new regime, the foreign companies had to assume all risks regarding the exploration programs even though they would not own the oil and gas eventually produced. The Houston plan turned out to be a failure; no significant investments or discoveries were made.
19.
In the early 1990s, given the failure of the Houston Plan to alleviate the energy sector’s critical condition, the GOA decided to deregulate the hydrocarbon industry and to privatize its utilities. Moreover, the GOA enacted a new energy legal framework for the energy sector. To induce foreign investment, the GOA then launched road shows in which it presented its new model to foreign investors, principally from the United States of America and Europe.
20.
The GOA instituted a "Legal Framework" that included: (i) the Deregulation Decrees, which deregulated the hydrocarbon sector; (ii) the Gas Law, which privatized Gas del Estado and provided for freely-negotiated gas wellhead prices; (iii) Plan Argentina, which set out the bidding terms and conditions for new exploration areas; (iv) the Conversion Decree, which invited service contractors with YPF (the State-owned oil company) to transform their contracts into exploration permits or exploitation concessions; and (v) the signing of the Substitute Protocol for Protocol No. 2 to the Agreement on Economic Cooperation No. 16 with Chile (the "Chile-Argentina Energy Treaty"). The Protocol was designed to integrate the Argentine and Chilean gas markets and which reinforced the deregulation of the natural gas industry through international commitments to Chile.
21.
The program for privatization of YPF, the state-owned oil company, included several stages prior to the privatization of YPF itself. YPF issued several calls for bids inviting private companies to enter into joint venture agreements relating to large producing fields.
22.
Tecpetrol, MASA (formerly Ampolex Argentina S.A.), Compañía General de Combustibles S.A. ("CGC"), and Petrobras Argentina S.A. (formerly Petrobras Internacional S.A.) executed an agreement with YPF to form an Unión Transitoria de Empresas ("UTE"), which was then approved in December 1992 by Decree 2446/92 (the "Aguaragüe Contract").6 Thus MASA acquired interests in Aguaragüe. This area is located in the Northwestern Basin in the Province of Salta, and includes various fields.
23.
The Aguaragüe Contract grants the joint venture participants the right to explore and exploit the hydrocarbon reserves in the Aguaragüe field. It also contains a production sharing arrangement that grants each of the joint venture partners a share in the production of the Aguaragüe field. The Aguaragüe Contract was agreed for a 25-year term, with an option to renew it for 10 years. MASA contends that it currently owns a 23% working interest in the Aguaragüe Contract and its hydrocarbon production.7 As a result of the exploration activities in the Aguaragüe Area, the UTE found gas in the San Antonio Sur Block. Consequently, in February 1998, the GOA granted a Concession for the exploitation of that block (the "San Antonio Sur Concession").8
24.
Since the San Antonio Sur Concession is located within the Aguaragüe Area and is subject to the Aguaragüe Contract, all the rights and guarantees arising from Decrees 305/92 and 2446/92 are fully applicable to it. Furthermore, the San Antonio Sur Concession reaffirmed the right to market the hydrocarbons produced freely, in accordance with the Deregulation Decrees "the terms of which are incorporated into the title of the Concession."9
25.
On 18 September 1996, MEDA and Mobil Oil Exploration and Production Southeast Inc. executed a Sale and Purchase Agreement (the "BHP Assignment Agreement") with BHP Petroleum (Argentina) S.A., BHP Petroleum (Argentina) Inc., BHP (Americas) Inc. and BHP Petroleum (GOM) Inc., through which BHP Petroleum (Argentina) S.A. assigned MEDA 90% of its working interest (a 27.99819% interest) in the title to the Sierra Chata Concession. Subsequently, BHP Petroleum (Argentina) S.A. and BHP Petroleum (Argentina) Inc. assigned their remaining working interest in the title to Sierra Chata (3.11091%) to MEDA.
26.
As a result of reorganization by Mobil Corporation of its affiliates’ holdings, effective on 9 December 1998, Mobil Argentina Ltd ("MAL") (previously named Monumentum Exploration Ltd) assigned all of its assets and liabilities, including its working interest in the Sierra Chata Concession (19.8865%), to MEDA.
27.
Chihuidos is located in the Neuquén Basin, in the Province of Neuquén, and includes the Sierra Chata field. This area is located close to Chile, which does not produce gas, and was eager to increase its gas imports for power generation, residential use, and petrochemical purposes.
28.
One of the contracts that resulted from the Houston Plan under which companies would not own the hydrocarbons produced10 was a service contract for the Chihuidos Area in the western Province of Neuquén. Several years later in 1991, through the Conversion Decree, the GOA provided parties to contracts, inter alia, under the Houston Plan the possibility of converting their contracts into new exploration permits and exploitation concessions in accordance with the Legal Framework.
29.
The Chihuidos Area was included in the Conversion program, and in September 1993, Argentina issued Decree 1969/93, which granted an exploration permit in the area to YPF, Petrolera Santa Fe, International Finance Corporation, SIPSA, CGC, and BHP. Decree 1969/93 provides that these companies shall:

• own the hydrocarbons produced;11

• have the right to freely market that gas in accordance with the Deregulation Decrees;12

• receive at least the compensation set forth in the Deregulation Decrees, in case of any restriction on their right to freely market hydrocarbons, for as long as the restriction is in force;13

• pay up to 12% in royalties, which can only be calculated on the basis of the prices effectively collected, with applicable deductions;14

• be protected from discriminatory taxes;15

• freely dispose of 70% of foreign exchange sale proceeds in accordance with the Deregulation Decrees, unless another provision entitles them to a higher percentage or eliminates the requirement.

30.
Decree 1969/93 also granted those companies the right to obtain an exploitation concession that would include the rights granted under the Deregulation Decrees and the Conversion Decree.16
31.
In June 1995, the GOA granted a concession for the exploitation of the Sierra Chata block in the Chihuidos area to Petrolera Santa Fe, Santa Fe Energy, BHP, Sociedad International Petrolera, CGC, Monument, and Gassur.17
32.
In September 1996, Argentina issued Resolution 140/96 of the Secretary of Public Works and Services, which grants a gas export permit for the Sierra Chata Concession authorising the concession holders to export up to 2.5 million m3/day to Chile for a maximum term of 15 years or until the depletion of the remaining certified reserves, whichever occurs earlier.18
33.
In granting the permit, the GOA expressly considered the provisions of the Chile-Argentina Energy Treaty and emphasized the importance of the regional integration of the gas market.19
34.
The Sierra Chata Gas Export Permit provides for firm export rights that could not be interrupted without compensation.20 Also Excess Gas could be exported under certain conditions.
35.
On 6 January 2002 the "State of Public Emergency and Reform of Exchange Regulation Law "25,561 (the "Emergency Law") was enacted.21
36.
Under Law 25,561 and Decree 214/02, the GOA unilaterally changed the provisions of private contracts between the Claimants and their domestic customers. These measures unilaterally converted Dollar-denominated obligations and receivables owed to the Claimants under gas supply contracts into Peso-denominated obligations at an exchange rate of US$ 1: AR$ 1.22 This was done at the same time that the GOA abrogated the Convertibility Law and devalued the Argentine Peso through Law 25,561.23 By the end of May 2002, the exchange rate had reached US$ 1: AR$ 3.60, and was in February 2009 approximately US$ 1: AR$ 3.50.
37.
Moreover, the GOA effectively prevented power generators and gas distributors from passing through any price increase to their own customers.24
38.
On 2 April 2004, many gas producers (but not the Claimants), signed an agreement with the GOA (the "First Gas Agreement").25 Through the First Gas Agreement, the GOA imposed on producers the duty to deliver certain volumes of gas to the different categories of consumers. In doing so, the GOA demanded that producers accept an obligation to supply the domestic market.
39.
The First Gas Agreement established a "price path" for the upward adjustment of gas prices at the wellhead for large industrial consumers and electricity generators from 1 May 2004 to 31 July 2005.
40.
On 17 May 2004, the Secretary of Energy began ordering producers - including those that did not sign the First Gas Agreement - to "re-route" and deliver all the volumes to certain domestic consumers, regardless of whether the producers had contractual relationships with those consumers.26 The stated reason for this re-routing of gas volumes was the delay in the renegotiations the GOA imposed on gas distributors, producers, and industrial customers under the terms of the First Gas Agreement.
41.
On 26 May 2004, the Secretary of Energy issued Resolution SE 503/04, which authorised the Undersecretary of Fuels to re-route" the Claimants’ gas production on a daily basis to gas distribution companies.27
42.
Soon after issuing Resolution SE 503/04, the Secretary of Energy issued Resolution SE 606/04, which enabled users that had purchased gas from gas distributors (or that had contracted exclusively for transportation and distribution services) to resell all or part of the gas to other users or distributors at freely-negotiated prices.28
43.
In April 2004, through the issuance of Resolution SE 265/04, Argentina began to restrict the gas exports of Argentine producers and sellers, including the Claimants, as a means of addressing the shortages in the domestic market.29
44.
In compliance with an instruction contained in Resolution SE 265/04, the Undersecretariat of Fuels temporarily approved a Curtailment Program for Gas Exports and Use of Transportation Capacity (the "Curtailment Program").30 The Curtailment Program provided for restrictions on: (i) all gas exports to the extent necessary to meet the domestic demand; and (ii) all gas transportation services related to exports if required to meet domestic demand. Through the Curtailment Program, the Secretary of Energy imposed restrictions on the Claimants’ exports to Chile. In turn, these export restrictions prevented the Claimants from exporting gas volumes even though they were previously committed under deliver-or-pay gas export sales contracts.31
45.
According to Resolution SE 265/04, these measures would remain in effect until the Secretary of Energy "decides that the available quantities of gas at the injection points of the Argentine transportation system are sufficient to meet domestic demand."32 The Claimants contend that the GOA’s actions artificially depress gas prices and drive up domestic demand, and therefore the resolution has effectively ensured that the GOA will continue imposing export restrictions indefinitely.
46.
In June 2004, the Secretary of Energy issued Resolution SE 659/04, which amended the Curtailment Program.33 Through this Resolution, the GOA instructed the Claimants to supply additional gas volumes to the local market, which according to the Claimants resulted in a significant curtailment of gas exports.34
47.
Resolution SE 659/04 entitled gas producers affected by the export curtailments to sales prices that were equivalent to the prices established for each basin in the First Gas Agreement. The Claimants contend that as a consequence, gas producers received a much lower price than the price to which they were entitled under their natural gas export agreements.
48.
Through Resolutions SE 752/05, 925/05, 1886/06, and 599/07, the GOA enacted additional measures that, according to the Claimants, reaffirmed the GOA’s decision to continue abrogating legal and contractual rights established in the Legal Framework, the Hydrocarbon Concessions and Contracts, and the Chile-Argentina Energy Treaty.35 These resolutions set forth a new mandatory mechanism for the purchase and sale of gas in the domestic market: they allow certain large users of gas, power generators, and CNG (compressed natural gas) stations to place "irrevocable offers" to purchase gas directly from gas producers at regulated prices.36
49.
The First Gas Agreement expired in December 2006. Resolution SE 599/07 approved the terms and conditions of the Second Gas Agreement.37 According to the Claimants, the Secretary of Energy issued that Resolution as an instrument to "persuade" gas producers to sign the Second Gas Agreement since the treatment granted to signing producers (the "Signing Producers") was more favourable than that granted to nonsigning producers (the "Non-Signing Producers").
50.
In the case of gas supply shortages in the domestic market, Resolution SE 599/07 provides that the GOA will "re-route" and curtail the exports and domestic sales of Signing Producers only after curtailing and "re-routing" the exports and domestic sales of Non-Signing Producers.38
51.
Decree 1589/89, one of the Deregulation Decrees, provided that the export and import of hydrocarbons and their byproducts would be exempt from any present or future tariffs, duties, or withholdings.39 In addition, the GOA granted safeguards against discriminatory or specific taxes.40 Through Decree 1969/93, the GOA included both of these protections in the Sierra Chata Concession.41
52.
In May 2004, through Decree 645/04, Argentina imposed a 20% Export Withholding on the Claimants’ gas exports, among other gaseous hydrocarbons.42 In addition, it authorized the Ministry of Economy to modify the Export Withholding rate.43 At that time, the alleged purpose of Export Withholdings on gas was to align the tax treatment of gas with crude oil and byproducts.44
53.
In June 2006, Argentina and Bolivia entered into the Framework Agreement for the Sale of Gas and the Execution of Projects Concerning Energy Integration (the "Framework Agreement").45 Under that Agreement, Argentina agreed to buy gas from Bolivia at US$ 5/MMBTU. This entailed a significant increase over the price Argentina had paid under a previous agreement with Bolivia (i.e., US$ 3.18/MMBTU) and it was much higher than US$ 1.20/MMBTU, the average regulated price then paid to MASA and other Argentine producers.
54.
The GOA decided to finance the import of the higher-priced Bolivian gas by further increasing the Export Withholding rate on domestic gas. In July 2006, the GOA: (i) increased the Export Withholding rate for gas from 20% to 45%;46 and (ii) modified the basis for calculating Export Withholdings; instead of calculating Export Withholdings based on the price that Argentine producers actually received (i.e., approximately US$ 1.65/MMBTU), Argentina began calculating the withholdings on the price at which it agreed to import gas from Bolivia (initially, US$ 5/MMBTU).47
55.
These measures effectively increased Export Withholdings on gas to a flat rate of US$ 2.25/MMBTU (45% of US$ 5/MMBTU) and raised the effective Export Withholding rate more than 67,5%, which exceeded the average export price that Argentine gas exporters received from foreign customers by approximately 40%. This amounts to 113% of the export price that the Claimants received and renders exporting gas unprofitable since all of the profit (and more) is taken by the GOA.48
56.
Through Resolution MEP 127/08, the GOA, once again: (i) increased the applicable Export Withholding rate on gas (from 45% to 100%); and (ii) altered the basis on which it calculates Export Withholdings, disregarding the much lower export prices actually received by exporters such as MASA.49 Under Resolution MEP 534/06, the GOA calculated Export Withholdings based on the price at which it imports gas from Bolivia (currently US$ 10.30/MMBTU). Since early 2008, the GOA has calculated Export Withholdings on the highest prevailing rate for gas imports (during the winter of 2008, between US$ 14.5-17/MMBTU due to the import of LNG).50
57.
Thus, Resolution MEP 127/08 entails a further increase of approximately 650% in the applicable Export Withholding rate. As a result, during the winter of 2008, export withholdings on gas exports in Argentina were approximately between US$ 14.5 and 17/MMBTU, that is between seven and eight times higher than the actual average export price they received by Argentine producers (around US$ 1.90/MMBTU).
58.
The Export Withholdings were initially designed to last five years.51 By virtue of Law 26,217, the GOA extended the period for imposing Export Withholdings through 2012.52 The GOA has now extended the period for imposing Export Withholdings to ten years.
59.
The Legal Framework provides that the highest royalty rate that could be imposed on gas producers is 12%.53 The Hydrocarbon Concessions and Contracts provide further guarantees to the Claimants in this respect. The Sierra Chata Concession provides that the highest royalty rate that could be imposed on the Claimants is 12%, and that it can only be calculated on the prices effectively collected.

1. Summary of the Parties’ Positions

a. The Claimants’ position

60.
The Claimants contend that MEDA between September 1996 and November 1997 acquired different portions of its current interest in the concession for the exploitation of the Sierra Chata block in the Chihuidos area, which interest was transferred to MASA effective 2005. Claimants assert that MASA owns a 50.99% working interest in the Chihuidos area and the Sierra Chata Concession.54
61.
The GOA’s measures to unilaterally convert Dollar-denominated obligations and receivables owed to the Claimants by their domestic customers under gas supply contracts into Peso-denominated obligations at an exchange rate of US $ 1:ARS$ 1 as well as to prevent power generators and gas distributors — the Claimants’ primary domestic customers — from passing through any price increase to their own customers, say the Claimants, violate the GOA’s guarantees under the Legal Framework and the contracts and licenses entered into by the GOA. Those measures also effectively eliminated any chance of renegotiating the Claimants’ gas supply contracts, and therefore, constituted an unlawful interference with their freely-agreed terms.
62.
Further, the Claimants assert that pursuant to Article 8 of Decree 214/02, the Argentine Government instructed courts with jurisdiction over controversies relating to these matters to maintain and preserve existing contracts in Peso terms. In practice, this measure, the Claimants contend, precluded parties from terminating contracts prior to their expiration due to the GOA’s alteration of the contract price or contract price-fixing mechanism.
63.
According to the Claimants the renegotiation of public service contracts between the GOA and gas and power distribution companies, a process provided for in Law 25,561,55 has been a massive failure. To renegotiate these contracts, the GOA demands that public utility companies waive their rights—as well as those of their foreign shareholders—to initiate or continue international arbitration proceedings against the GOA based on the GOA’s measures.56
64.
In sum, the Claimants contend that a de facto price freeze on natural gas resulted from (i) the mandatory currency conversion of the prices the Claimants’ local customers paid to the Claimants, (ii) the price freeze imposed on gas distributors and power generators, (iii) the obstacles the GOA imposed to prevent the Claimants and their customers from terminating their contracts, and (iv) the protracted renegotiation process between the Claimants’ main customers and the GOA.
65.
Through the First Gas Agreement, GOA imposed on producers the duty to deliver certain volumes of gas to different categories of consumers. In doing so the GOA demanded that producers accept an individual obligation to supply the domestic market, even though no such obligation existed in the Legal Framework.
66.
While the price path established by the First Gas Agreement provided for the gradual normalisation of gas prices for large industrial consumers, CNG stations and power generators, the First Gas Agreement maintained frozen prices for residential consumers, which represent approximately 22% of the demand.57
67.
Moreover, the pesification of gas supply contracts - and particularly the GOA’s additional measures that locked gas producers into frozen gas wellhead prices and depressed domestic energy prices - caused an increase in the demand for gas. At the same time, these measures, say the Claimants, discouraged investors from making the investments needed to drill new wells, increase reserves, and meet that increased demand.
68.
According to the Claimants the result of these and other measures has been the lack of new private investment in power generation and oil and gas drilling in Argentina. Beginning in 2004, the GOA invoked the gas shortage as a justification for additional measures targeted at the Claimants' business.
69.
Resolution SE 606/04, which enabled users that had purchased gas from gas distributors (or that had contracted exclusively for transportation and distribution services) to resell all or part of the gas to other users or distributors at freely-negotiated prices, resulted in flagrant discrimination against the Claimants because the GOA forced them to accept a substantially lower price for their domestic gas sales, while industrial users were allowed to obtain substantial profits by reselling at higher prices.58
70.
By restricting the gas export of Argentine producers and sellers, including the Claimants, the GOA disregarded Claimants' right to freely market the gas they produce, as well as Claimants' firm export rights under the Sierra Chata Export Permit.
71.
The export restrictions and the orders to re-route and deliver to certain domestic customers regardless of the producers had contractual relationships with those customers violated the Claimants’ rights and resulted (and continue to result) in a taking of revenues because they force the Claimants to deliver these export volumes to domestic users at prices that are substantially lower than those agreed in their export contracts.59 Despite this taking of revenues, the GOA breached its commitment to compensate the Claimants for export restrictions at the rate of at least 35% of the international price of the Arabian Light crude oil of 34° API for 1,000m3 of 9,300 KCal.60
72.
Those measures also required the Claimants to ignore their existing contractual commitments, and instead, deliver their gas production to large domestic users, power plants and CNG stations.
73.
Resolution SE 752/05, which allowed certain domestic customers to make irrevocable offers, put the Claimants in a no-win situation. If the Claimants do not "agree" to an irrevocable offer, then the Secretary of Energy requires them to supply gas to the domestic market at a price that is significantly lower than the price they would have received had they agreed to the irrevocable offer.61 But if the Claimants yield to the GOA’s pressure and "agree" to the irrevocable offer, they would be prevented from meeting their export commitments in their contracts with export customers.
74.
The Claimants contend that Argentina forces Non-Signing Producers such as the Claimants to "re-route" gas shipments from customers paying the highest prices to consumers paying the lowest ones. These restrictions not only preclude MASA from complying with its existing export commitments, but also obligate it to supply gas to domestic consumers with which it has no contractual relationships at substantially lower prices than the ones agreed under its export agreements.
75.
Although domestic consumers pay Signing Producers in accordance with the price formulas established in the Second Gas Agreement (which are also capped prices), domestic consumers pay Non-Signing Producers much lower prices for the same volumes. Consequently, the prices that MASA receives for its re-routed gas are not only substantially lower than those agreed in the contracts with its export customers, but they are also lower than the prices that the Signing Producers receive for their "rerouted" volumes.
76.
Even though MASA ultimately chose not to sign the Second Gas Agreement, the Claimants assert that Resolution SE 599/07 presented MASA with two choices, both of which entailed bad outcomes: (i) to sign the Second Gas Agreement and consequently assume domestic supply commitments that it could not possibly fulfil without interrupting supplies under existing export contracts, or (ii) to become a NonSigning Producer, and therefore, be the first to suffer from export curtailments and rerouting to domestic consumers at depressed, regulated, and discriminatory prices
77.
By enacting Law 25,561, which authorised the Executive Branch to impose export withholdings on hydrocarbons and authorised the Executive Branch to establish the respective applicable rates,62 the GOA completely disregarded the guarantees, provided for by Decree 1589/89,63 that export and import of hydrocarbons and their byproducts would be exempt from any present or future tariffs, duties, or withholdings and the safeguards against discriminatory and specific taxes.
78.
As mentioned above, the Legal Framework provides that the highest royalty rate that could be imposed on gas producers is 12%.64 Under Law 25,561, however, the GOA prohibited the Claimants from deducting Export Withholdings payments when calculating royalties. This prohibition forced the Claimants to pay royalties on their gas export sales based on prices higher than they received (i.e., without deducting Export Withholdings).

b. The Respondent’s position

79.
Argentina first raises a number of objections relating to the jurisdiction of the Centre and of the competence of the Tribunal as well as objections relating to the admissibility of the Claimants’ claims. On those grounds, Argentina requests the Tribunal to declare that this dispute does not fall within the jurisdiction of the Centre or the competence of the Tribunal as well as that the claim is inadmissible. Those objections are dealt with below at VI.
80.
Argentina contends that there are three main reasons why this claim, in its entirety, manifestly lacks any merit: (i) with respect to the regulatory measures for the pesification of contracts, there are no longer any serious doubts as to the fact that this was a necessary measure for the protection of public order and essential security interests, expressly authorized by Article XI of the BIT and which, therefore, does not breach the Treaty; (ii) with regard to the export duties, as they are "matters of taxation" in the terms of Article XII of the BIT, they fall outside the jurisdiction of this Tribunal, except where there is expropriation or an investment agreement, which is clearly not the case here; and (iii) in relation to the requests for additional injection, as the Claimants decided to (successfully) submit the dispute to the Argentine courts, the Tribunal also lacks jurisdiction over that measure in pursuance of the provisions of Article VII.3(a) of the BIT (choice of forum). According to Argentina, these three fundamental reasons are enough for the Tribunal to reject the claim in whole. However, there are also significant additional reasons why the Claimants’ claims must be rejected by the Tribunal.
81.
The measures adopted by the Argentine Government in order to deal with the most serious crisis in its entire history, as well as to defuse the gas crisis are expressly authorised under Article XI of the BIT.
82.
As a result, those measures could never amount to a violation of the BIT or give rise to the Argentine State’s international responsibility. Article XI of the BIT is a primary rule which defines the scope of the substantial obligations under the BIT.
83.
Argentina contends that the intention of the Contracting Parties to the BIT was that each Contracting party has the exclusive right to judge whether the measures taken under Article XI of the BIT were necessary to maintain public order or protect essential security interest, subject only to the principle of good faith. This should be taken into account by the Tribunal.
84.
According to Argentina, Article XI applies to any situation where the State must adopt measures in order to maintain public order or protect its own essential security interests, since that provision contains no limitation in that respect.
85.
The pesification of the economy was a necessary measure in order to maintain public order, as well as, to protect essential security interests. Furthermore, the export duties and the requests for additional injection of gas volumes were also necessary in order to guarantee domestic supply and maintain public order.
86.
The imposition of export duties was and still is a necessary measure. Export duties are necessary, since they provide means for paying the costs required by the emergency situation and for dealing with energy problems existing in the country.
87.
The requests for additional injection were and are still necessary solutions to the delicate situation regarding energy. The supply of the domestic market is the main objective and priority of all hydrocarbon activities in Argentina and is confirmed by the Hydrocarbons Law.
88.
Since the application of Article XI means that the measures adopted in accordance therewith are lawful and thus do not amount to a violation of the BIT, there is no obligation to compensate for the consequences derived from such measures.
89.
Moreover, the Argentine Republic acted in accordance with Article IV.3. of the BIT. On the one hand, the measures taken by the Argentine Government and challenged by the Claimants responded to a state of national emergency. The State was forced to adopt the measures at issue to avoid the dangers deriving from such state of emergency. On the other hand, the measures adopted in response to the state of national emergency were of a general nature and impacted the Argentine economy as a whole
90.
In conclusion, in cases of "state of national emergency" or "other similar events," if foreign investors suffer losses, the only obligation of that State under the BIT pursuant to Article IV.3 is not to discriminate if it decides to take measures in relation to such losses. The Argentine Republic fully complied with the special regime under the BIT for emergency situations, and, therefore, it does not violate any of the BIT provisions.
91.
Pursuant to Article XII of the BIT, the tax related arbitral claims are limited to cases of expropriation, transfers or investments agreements. The tax measures adopted by Argentina are not expropriatory in nature and they have not breached any investment agreement between the Claimants and Argentina. In addition, Article XII of the BIT expressly excludes the possibility that export duties and royalties may be held to be contrary to the standard of fair and equitable treatment, the standard of protection and security, the provision on arbitrariness and discrimination and the umbrella clause.

B. The Final Submissions of the Parties

92.
Paragraph 229 of the Claimants’ Post Hearing Brief reads as follows:

"For the reasons stated herein, the Claimants respectfully request an award granting the following relief:

A decision rejecting Argentina’s objections to jurisdiction of the Tribunal and the admissibility of the claims;

A finding and declaration that Argentina has violated various provisions of the BIT and international law;

An order that Argentina compensate the Claimants for all damages they have suffered;

An order that the Argentine Republic pay the costs of these proceedings, including the Tribunal’s fees and expenses, and the costs of the Claimants’ legal representation and other costs;

An award of pre- and post-award interest on all amounts awarded, compounded quarterly until the date of payment; and

A gross-up of any taxes that may be imposed by the Argentine tax authorities; and

Such other relief as may be appropriate under the BIT or may otherwise be just and proper."

93.
Paragraph 223 of Argentina’s post-hearing submissions states the following:

"In view of the foregoing, the Argentine Republic, respectfully requests the Tribunal:

to declare the Centre’s absence of jurisdiction and the Tribunal’s absence of competence over the Claimants’ claim;

alternatively, to dismiss each and all of the claims put forward by the Claimants; and

to order the Claimants to pay for all costs and expenses arising from these arbitration proceedings, plus any applicable interest."

VI. ISSUES OF JURISDICTION

A. General Observations

94.
Article 25 of the ICSID Convention lays down the general parameters for ICSID’s activity and deals with the substantive questions of jurisdiction of the Centre. Article 41 of the Convention makes the arbitral tribunal the judges of their own competence.
95.
Article 25 of the Convention contains requirements relating to the nature of the dispute (ratione materiae) and to the parties (ratione personae). In addition the parties must give their consent. The requirements relating to the nature of the dispute are that it must arise directly from an investment and that it must be of a legal nature. Those relating to the parties specify that one side must be a Contracting State and the other a national of another Contracting State. All other parts of Article 25 either define or otherwise specify these essential requirements.
96.
Articles VII (4) of the BIT provides that each party to the Treaty consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice specified in the written consent of the national or company under paragraph 3 of the same article. This paragraph provides that the national or company concerned may choose to consent in writing to the submission of the dispute for settlement by binding arbitration inter alia to the International Centre for the Settlement of Investment Disputes ("Centre"), provided that it has not submitted the dispute for resolution to the courts or administrative tribunals of the Party that is a party to the dispute or in accordance with any applicable, previously agreed dispute-settlement procedures and that six months has elapsed from the date on which the dispute arose.
97.
The Claimants contend that the dispute between the Claimants and Argentina is a legal dispute over the injuries suffered by MEDA and MASA under the BIT and international law and that the dispute arises directly out of MEDA's and MASA's investments, namely: (i) legal and contractual rights arising under the Legal Framework, the Hydrocarbon Concessions and Contracts, and the Sierra Chata Gas Export Permit; (ii) rights arising out of export and domestic gas contracts; (iii) US$ 523 million invested by the Claimants in Argentina; and (iv) claims to money and performance having economic value under the Claimants' contract and legal rights.
98.
The dispute is between Argentina, which became a Contracting State to the ICSID Convention on 18 November 1994, and MEDA, a company incorporated in Delaware and a national of the United States, which became a Contracting State on 14 October 1966 and MASA, an Argentine corporation, that the Claimants contend is controlled by US corporations.
99.
According to the Claimants, the dispute arose with the Emergency Law No. 25,561, which was enacted and partially promulgated on 6 January 2002 and it was published in the Argentine Official Gazette on 7 January 2002.
100.
Pursuant to Article 25 (2) (b) of the ICSID Convention "National of another Contracting State" means any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to arbitration and any juridical person which had the nationality of the Contracting State, party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as national of another Contracting State for the purposes of the ICSID Convention.
101.
Article VII (8) of the BIT provides that for purposes of an arbitration held under paragraph 3 of the same Article, any company legally constituted under the applicable laws and regulations of a Party, or a political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall be treated as a national or company of such other Party in accordance with Article 25 (2) (b) of the ICSID Convention.
102.
The Claimants contend that MASA, despite being an Argentine corporation, should be treated as a U.S. Company for the purposes of this arbitration proceeding, because on the date MASA consented to submit this dispute to ICSID arbitration - 19 December 2003 - and immediately before the event or events giving rise to this dispute - 6 January 2002 -, MASA was indirectly controlled by Exxon Mobil Corporation, a company incorporated under the laws of the State of New Jersey in the United States of America.
103.
Argentina and the Claimants have consented in writing to submit the dispute to ICSID arbitration; Argentina’s consent is contained in Article VII(4) of the BIT; MEDA and MASA notified Argentina of their consent as required by Article VII(3)(a)(i) of the BIT, through a letter on 19 December 2003.

B. Argentina's objections to the jurisdiction of the Centre, the competence of the Tribunal and the admissibility of the Claim

1. General Observations

104.
Argentina requests the Tribunal to declare that this dispute does not fall within the jurisdiction of the Centre or the competence of the Tribunal and that it is inadmissible. Although the title of the document in which this request is made is entitled "MEMORIAL OF THE ARGENTINE REPUBLIC ON OBJECTIONS TO THE JURISDICTION OF THE CENTRE, THE COMPETENCE OF THE TRIBUNAL AND THE ADMISSIBILITY OF THE CLAIM", all the seven objections included in the document are under the heading "Objections to Jurisdiction".
105.
Of those seven objections, the following are objections to ICSID jurisdiction and to the competence of the Tribunal:

1) The Claimants have not proven that MED A had acquired the investment it invokes before the 19 December 2003, when the Request for Arbitration was made;

2) Neither MEDA - directly or indirectly - nor MASA - directly are entitled to pursue claims in relation to the Exploration Permit, the Exploitation Concession and the Transportation Concession in the Chihuidos Block for measures adopted after the transfer of going concern from MEDA to MASA;

3) There is no evidence that MASA, which is an Argentine corporation, on 19 December 2003 (i.e. on the date on which the Claimants consented to submit the dispute to the jurisdiction of ICSID) was subjected to foreign control;

4) ICSID has no jurisdiction and this Tribunal has no competence in the matters of taxation raised in this case, since pursuant to Article XII of the BIT the provisions of the BIT shall apply to matters of taxation only with respect to cases envisaged in that Article.

In addition to those four objections to ICSID jurisdiction and to the competence of this Tribunal, Argentina raises three more objections based on the admissibility of the Claim:

1) The two successive Ancillary Claims the Claimant submitted after filing and registration of the Request for Arbitration are not admissible, since they do not arise directly out of the subject-matter of the dispute raised in the Request for Arbitration and are not closely connected with that dispute, in the sense of Article 46 of the ICSID Convention and Rule 40 of the Arbitration Rules.

2) The Claimant's claims in relation to restrictions on natural gas exports and the rerouting of natural gas volumes to the domestic market are not admissible, given that MEDA and MASA submitted those issues to Argentine courts before submitting them to the Centre.

3) The claim regarding the obligation to pay royalties on gas exports, without deducting Export Withholdings has become moot.

107.
When analyzing the objections raised by Argentina, the Tribunal will follow the same order in which they have been submitted by Argentina without any distinction between the objections relating to jurisdiction strictu senso and objections relating to the admissibility of the Claim.
108.
The order in which the objections were presented is as follows: First, The Claimants' First Ancillary and their Second Ancillary Claim, which were filed on 10 February 2006 and 15 October 2007 respectively, i.e. after the filing and registration of the Request for Arbitration in this case on 19 December 2003 and 5 August 2004 respectively, do not arise directly out of the subject-matter of the dispute raised in the Request for Arbitration and thus do not satisfy the requirements of Article 46 of the ICSID Convention and of Arbitration Rule 40. Second, the Tribunal lacks competence with respect to the Claimants' claims in relation to the restrictions on natural gas exports and the rerouting of natural gas volumes to the domestic market, given that MEDA and MASA submitted those issues to the Argentine courts before submitting them to the Centre. Third, the claim regarding the obligation to pay royalties on gas exports without deducting the Export Withholdings has become moot. Fourth, the Tribunal lacks jurisdiction over the Claimants' taxation claims under Article XII of the BIT, since that article only allows tax claims for expropriation, failure to observe the terms of either an investment agreement or an investment authorization or with respect to transfer of funds. Fifth, there is no evidence of MEDA's alleged investment. Sixth, MEDA has not proven to have validly assigned its alleged interests to MASA. Seventh, the Claimants have not proven that MASA, despite being an Argentine corporation, should be treated as a U.S. investor under Article 25(2)(b) of the ICSID Convention and Article VI (8) of the BIT for the purposes of this arbitration, i.e. that MASA on the date they consented to submit this dispute to the jurisdiction of ICSID -19 December 2003 - and immediately before the occurrence of the event or events giving rise to this dispute was indirectly controlled by Exxon Mobil Corporation, a company under the laws of the State of New Jersey in the United States of America
109.
At the outset, before analyzing the particular issues raised by Argentina, it is vital to emphasize the scope and standard of review that shall be applied to each jurisdictional objection. In international adjudication and arbitration, it is axiomatic that the standard of review at the jurisdictional threshold is whether the factual allegations, if true, could constitute a violation within the Tribunal’s jurisdiction. If the answer to this inquiry is in the affirmative, jurisdiction should be sustained. Thus the Claimants need not establish either that the facts alleged are true or that such facts, if proved, would necessarily violate the BIT.

2. First objection: The Tribunal has no jurisdiction over the Claimants First and Second Ancillary Claim

a. The Parties’ Positions

i. The Respondent

110.
Argentina contends that the Claimants' First Ancillary Claim and their Second Ancillary Claim are not admissible on the ground that those claims do not arise directly out of the subject-matter of the dispute in the Request for Arbitration.
111.
Argentina asserts that those ancillary claims do not satisfy the requirement in Article 46 of the ICSID Convention and Rule 40 (1) of the ICSID Arbitration Rules, pursuant to which the ancillary claim must arise directly out of the subject-matter of the dispute. For any ancillary claim to be admissible, Argentina argues that there must be a direct and very close connection between such claim and the subject-matter of the primary claim, such that they cannot be separated from each other and that the main claim cannot be settled if the ancillary claim is not adjudicated.
112.
The subject-matter of the dispute raised in the Request for Arbitration, dated 19 December 2003, was the alleged violation by the Argentine Republic of the BIT to the detriment of MEDA and MASA, as a result of the adoption of Law No. 25,561 and Presidential Decree No. 214/2002, the pesification of natural gas and natural gas liquids supply contracts, and the elimination of adjustment and indexation clauses contained in public utility contracts, including tariffs for natural gas distribution.
113.
However, in their First Ancillary Claim dated 10 February 2006, the Claimants mentioned complaints completely different to those included in the Request for Arbitration. Such complaints related to the restrictions and rerouting of gas exports, as well as to the imposition of export duties by the Argentine Republic.
114.
On 15 October 2007, the Claimants filed a Second Ancillary Claim, where they insisted on their ancillary claims regarding the restrictions on the rerouting of exports indicated in their First Ancillary Claim.
115.
In light of the above, neither the First Ancillary Claim nor the Second Ancillary Claim arises directly out of the subject-matter of the dispute raised by the Claimants in their Request for Arbitration. The Request for Arbitration refers to a measure of general regulation, known as "pesification," which regulated the currency of hundreds of thousands of contracts of very different nature — from lease agreements between two individuals involving insignificant amounts to public utility contracts —and to the elimination in public utility contracts of indexation clauses based on price indexes from other countries. Conversely, the First and Second Ancillary Claims refer to restrictions on gas trade, which measures exclusively refer to the hydrocarbons sector, and to the imposition of export duties on natural gas.
116.
The Ancillary Claims challenge measures different to those challenged in the Request for Arbitration, they involve different legal issues and different elements, and the scope and nature of the dispute raised in the Ancillary Claims are different to those raised in the Request for Arbitration

ii. The Claimants

117.
In the Claimants view their ancillary claims comply with Article 46 of the ICSID Convention and Rule 40 of the Arbitration Rules, since they arise directly out of the subject-matter of the dispute, fall within the scope of the parties' consent to ICSID arbitration and are otherwise within the Tribunal's jurisdiction. Even if the Tribunal were to accept Argentina's objection on ancillary claims, that conclusion would not dispose of any jurisdictional issues since the Claimants would maintain standing to bring their ancillary claims in a separate ICSID proceeding. The practical consequence of accepting Argentina’s argument would entail a risk of inconsistent decisions under the BIT regarding Argentina’s measures toward the Claimants’ investment and would conflict with the goals of judicial economy that the drafters of the ICSID Convention sought to achieve.

b. The Tribunal's analysis

118.
The question to be addressed by the Tribunal is whether the First Ancillary Claim and the Second Ancillary Claim are "incidental or additional claims arising directly out of the subject-matter of the dispute." As Argentina points out Note B to Arbitration Rule 40 in the explanatory note adds the following explanation:

"The test to satisfy this condition is whether the factual connection between the original and the ancillary claim is so close as to require the adjudication of the latter to achieve the final settlement of the dispute, the object being to dispose of all the grounds of dispute arising out of the same subject-matter."65

119.
The quotation above from Note B (a) to Arbitration Rule 40 may seem to be a somewhat narrower description of the standard which, of course, is to be found in the authentic languages of Article 46 and Rule 40. But, the phrase "to require adjudication of the latter in order to achieve the final settlement of the dispute" is clearly not equivalent to, as Argentina suggests, to a requirement that ancillary claims be adjudicated if, and only if, the initial claims cannot be resolved without the ancillary claims. That is not what Article 46 and Rule 40 say.
120.
Thus the Tribunal must reach a determination on the subject-matter of the dispute and decide whether the ancillary claims arise directly out of that subject-matter.
121.
In their Request for Arbitration dated 19 December 2003, the Claimants submit at page 22 under the heading "The Dispute" as follows:

"In breach of the above undertakings and the guarantees and protections established in the BIT, international law, the Hydrocarbon Regulatory Framework, the Hydrocarbon concessions and Contracts and other legal and contractual rights of the Claimants, Argentina has unilaterally taken certain measures including, but not limited to, the enactment, issuance and/or approval of Law 25,561 AND Decree No 214/2002, as amended. Wide ranging and damaging changes have been introduced, including the repeal of certain key provisions of the Hydrocarbon Regulatory Framework, which directly impacted and significantly injured Claimants' investments in Argentina."

122.
In the light of this broad language and since the claim raised in the Request for Arbitration and the ancillary claims involve the same contracts, concessions and permits and legal framework and arise of the sovereign measures which directly affected the Claimants' legal and contractual rights and their natural gas business, the Tribunal is of the view that in the instant case the subject-matter of the dispute are the alleged damages caused, it is argued, by Argentina's violation of its obligations owed to the Claimants under the BIT. The measures giving rise to the claim raised in the Request for Arbitration and the ancillary claims form a unified sequence of sovereign acts. The GOA enacted the measures that form the basis of the ancillary claim in reaction to the macroeconomic effects of the measures at the heart of the claim raised in the Request for Arbitration. Those measures constitute an aggravation of the initial restrictions on the Claimants' right to freely market and price their natural gas production.
123.
Moreover, as the Claimants argue, consideration of the original claim in isolation would not fully resolve the dispute over price interference, which includes measures giving rise to the ancillary claims. Even if Argentina's objection on ancillary claims were accepted that conclusion would, as the Claimants argue, not dispose of any jurisdictional issues since this would not affect the Claimants standing to bring their ancillary claims in a separate ICSID proceeding. Thus also procedural efficiency and the interest to avoid inconsistent decisions speak against Argentina's objection. Resolving the original and ancillary claims in the same arbitration will ensure a more consistent and efficient outcome. Argentina will suffer no prejudice by the consolidation of the Claimants' original and ancillary claims, since the ancillary claims were filed well in advance of the Tribunals constitution, and Argentina and ICSID were aware of those claims when making their decisions of whom to appoint and whether to accept appointments to the Tribunal. The objection is accordingly dismissed.

3. Second objection to jurisdiction - Fork in the road

a. The Parties’ Positions

i. The Respondent

124.
Second, Argentina contends that the Tribunal lacks competence with respect to the Claimants' claims in relation to the restrictions on natural gas exports and rerouting of natural gas volumes to the domestic market, given that MEDA and MASA submitted those issues to the Argentine courts approximately two years before submitting them to the Centre. This, it is alleged, amounts to the choice of local courts under the BIT and hence the "fork in the road" provision has been triggered and the jurisdiction of an ICSID tribunal would thus be precluded.
125.
Article VII of the BIT sets forth inter alia:

"2. In the event of an investment dispute, the parties to the dispute should initially seek a resolution through consultation and negotiation. If the dispute cannot be settled amicably, the national or company concerned may choose to submit the dispute for resolution:

a) to the courts or administrative tribunals of the Party that is a party to the dispute; or

b) in accordance with any applicable, previously agreed disputesettlement procedures; or

c) in accordance with the terms of paragraph 3.

3. (a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b) and that six months have elapsed from the date on which the dispute arose, the national or company concerned may choose to consent in writing to the submission of the dispute for settlement by binding arbitration:

i) to the International Centre for the Settlement of Investment Disputes("Centre") established by the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington, March 18, 1965 ("ICSID Convention"), provided that the Party is a party to such Convention;..."

126.
MASA and MEDA filed with the federal courts of the provinces of Salta and Neuquén, respectively, two amparo actions asking that the measures taken by the GOA in relation to natural gas exports and rerouting of natural gas volumes to the domestic market be set aside on grounds of illegitimacy and manifest arbitrariness. In such actions filed by MEDA and MASA with the Argentine federal courts, the Claimants complained about the same resolutions, decisions and notes issued by the Argentine authorities as the one they complained about before ICSID and this Tribunal in their ancillary claims.
127.
MASA filed before the local courts a claim on the grounds of the illegality and arbitrariness of "Resolution No. 265 of the Secretariat of Energy, of Decision No. 27/04 of the Under-Secretariat of Fuels," and of "Resolution No. 659/2004 of the Secretariat of Energy, amending Decision No. 27/04 of the Under-Secretariat of Fuels." Furthermore, in its financial statements, MASA reported that it had challenged the rules related to gas rerouting and Resolution No. 810/07 of the Secretariat of Energy, suspending the permit to export from Aguaragüe.
128.
MEDA also filed claims before the local courts, asking that the following regulations be set aside on grounds of illegality and manifest arbitrariness:

"(a) article 31 of Presidential Decree No. 180/04, article 1(c) of Resolution No. 265/04 of the Secretariat of Energy and Decision No. 27/04 of the Under-Secretariat of Fuels;

(b) Notes No. 1261 and 1269 of the Under-Secretariat of Fuels and Resolution No. 503/04 of the Secretariat of Energy;

(c) Resolution No. 659/04 of the Secretariat of Energy;

(d) Notes No. 1871, 2016, 2054, 2132 and 2155 of the UnderSecretariat of Fuels, Resolutions No. 807/04, 909/04 and 715/04 of the Secretariat of Energy and Presidential Decree No. 741/04; Marketing Office, and Resolution No. 752/05 of the Secretariat of Energy;

(l) Notes No. 1414 and 1451 of the Argentine Hydrocarbons Office; and

(m) Resolutions No. 925/05 and 930/05 of the Secretariat of Energy."

129.
In the Respondent's view, it is clear that MEDA's and MASA's claims filed with the Argentine courts are substantially the same as their claims subsequently filed with ICSID.
130.
In order for the fork-in-the-road provision to apply, it is not necessary for the claims filed with the local courts to be exactly identical to the claims filed with international tribunals, but it is enough for the claims to be substantially the same.
131.
Finally, the Respondent emphasises that MEDA and MASA's claims submitted to the Argentine courts are based on the same measures and grounds as their claims before this Tribunal. The Claimants made their choice and decided to submit the issues related to restrictions on natural gas exports and rerouting of natural gas volumes to the domestic market to Argentine courts, which is why they have forfeited the possibility of raising such issues before ICSID and this Tribunal, pursuant to Article VII(3)(a) of the BIT. Consequently, the Tribunal has no jurisdiction with respect to those issues.

ii. The Claimants

132.
The Claimants are of the opinion that to trigger the fork-in-the road provision the amparo actions must have involved an investment dispute as defined in the BIT, as well as a purpose and a cause of action identical to that before the Tribunal in this arbitration. The disputes to which the fork-in-the road provision in the BIT applies are "investment disputes", as defined in Article VII (1) of the BIT, which provides:

"For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party's foreign investment authority (if any such authorization exists) to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment."

133.
In the Claimant's view the amparo actions instituted in Argentine courts are not such disputes. Those actions did not involve any claims that Argentina violated the BIT. The sole purpose of the amparo actions was to declare Argentina's export restrictions and re-routing measures as unconstitutional and void under Argentine law. The object of this BIT arbitration is to determine whether Argentina has violated the treaty provision of the BIT, and if so, what damages those violations yield. The decisions in the amparo actions could not resolve these questions.
134.
Accordingly, the Claimants' amparo actions were aimed at the restoration of legal and constitutional rights under Argentine laws and there was no jurisdiction other than the Argentine courts to deal with the constitutionality of the measures in Argentina or for the Claimants to defend their rights under Argentine law. However, damage claims are not admissible in amparo actions.
135.
Had the Claimants not been able to lodge the amparo actions, they would have been forced to passively watch their investment further deteriorate and would have suffered potential legal prejudice in their relationships with Chilean export customers who expected the Claimants to diligently defend their right to export the gas quantities needed to perform their gas sales contracts. Moreover, had the Claimants not taken legal action, Argentina likely would have misconstrued that decision as acquiescence, as it has argued in several other ICSID proceedings.
136.
The Claimants conclude that the fork-in-the -road clause in the light of the decisions of many ICSID tribunals, only excludes disputes before international tribunals that have been previously brought before local courts when those disputes involve the same purpose and the same cause of action - namely an investment dispute under the BIT. Thus the Claimants are of the view that Argentina's fork-in-the-road objection lacks merit and request that it be rejected.

b. The Tribunal's analysis

137.
This objection to the admissibility of the claims only concerns the claims in relation to export restrictions and rerouting of volumes of natural gas to the domestic markets.
138.
According to a note of MEDA and MASA of 13 July 2008 addressed to the Secretary of Energy, MEDA and MASA relinquish their rights to claim and/or begin or follow any action, national or international, arising out of or having their origin in the restrictions to the export of natural gas resulting from the application of several resolutions inter alia Resolution 810/07.66 Taking into account this note and the motion filed by MASA on 21 December 2009 relinquishing the amparo action and the supplementary amparo petitions filed with the Federal Court of Salta (concerning the Aguaragüe exploitation),67 the objection is limited to the amparo action brought before the Federal Court of Neuquén in 2004 (concerning the exploitation in the Chihuidos area). This amparo action has been decided through the first instance ruling by the Federal Court of Neuquén dated 30 June 2010, in which the Claimants' claim was allowed.68
139.
As stated by the Claimants, the fork-in-the -road clause, in the light of the decisions of many ICSID tribunals69, only excludes disputes before international tribunals that have been previously brought before local courts when those disputes are between the same parties and involve the same purpose as well as the same cause of action.
140.
Article 43 of the Argentine Constitution provides:

"Any person may file an expedited and prompt amparo action, if there is no other suitable judicial remedy, against any act or omission on the part of public authorities or any private party that impairs, threatens to impair, restricts or in any other way affects rights and guarantees protected by this Constitution, a treaty or a law in an overtly arbitrary or illegal manner In this case the judge may declare the unconstitutional nature of the standard on which the act or omission is founded."

141.
The Tribunal finds, in particular in the light of the legal opinion by Dr. Bianchi, which it regards reliable, that under Argentine law, the sole purpose of "amparo actions" is to guarantee the protection of constitutional rights upon violations caused by overtly illegal or arbitrary acts on the part of public authorities or private parties.70 The amparo is a strictly summary trial, very brief, with limited proof, where the purpose is to obtain the statement of unconstitutionality or illegality of norms or a regulation, and it has no other purpose. The deadline of an amparo is very brief i.e. 15 working days. The deadline starts when the administrative action is notified, if this is an administrative action, at the very moment when the law or regulation is published in the Official Gazette, or else at the moment when the material conduct, is informed to the person concerned, and the person concerned can say that it has had the truthful knowledge. If these fifteen days lapse without a claim brought under the amparo, the right for an amparo claim will be lost.71 The amparo actions are not admissible if the disputed matters require a broader investigation and production of evidence.72
142.
Thus, an amparo action constitutes an alternative remedy to ordinary proceedings. This also follows from the fact that amparo actions are devised as summary actions with very short procedural terms that do not allow for extended debate or the production of much evidence, which is consistent with their purpose: To order that the violation of constitutional rights and guarantees cease immediately.
143.
Amparo actions are not a proper means to seek damages. Amparo actions are extraordinary and their purpose is exhausted once the court orders the immediate cessation of the overtly illegal governmental conduct. Thus amparo actions are not available to seek damages.73 This is obvious also in the light of the decisions of the Argentine Supreme Court referred to in Dr. Bianchis’ report.74
144.
The amparo actions that the Claimants filed with Argentine courts are not based on violations of the US-Argentina BIT. Rather, they only invoke provisions of the Argentine Constitution (the right to equality, property rights and the due process of law) and the Substitute Protocol No. 2 of ACE 16 executed in Buenos Aires on 7 July 1995.
145.
The Tribunal finds it obvious that the sole purpose of the amparo actions was to declare Argentina's export restrictions and re-routing measures as unconstitutional and void under Argentine law. The purpose of an amparo is the restoration of the legal and constitutional rights restricted through acts that are manifestly illegal or arbitrary. As explained by Professor Reisman in his expert opinion, the amparo actions were defensive actions that the Claimants were compelled to file to avoid defaulting on their legal obligations to third parties in Chile.75 An ICSID arbitral tribunal has not the power to declare an Argentine law unconstitutional or to grant an amparo. The Claimants instituted the amparo actions in order not to lose the rights they contend they have and not in order to seek damages. On the other hand, the purpose of the ICSID arbitration is to establish whether damages are owed by Argentina for violation of the BIT standards. Amparo is not a precondition to claim damages. Thus the amparo actions have a different cause of action and a different purpose and object than this ICSID arbitration. This is so even if decisions rendered in amparo proceedings become res judicata in relation to any subsequent claims for damages in the event that a measure is held to be unlawful.
146.
To conclude, this Tribunal has no jurisdiction to set aside any of the laws or regulations envisaged in the amparo actions or declare them void under Argentine law. Conversely, the local courts of Argentina, in an amparo action, had, and have, no authority to adjudicate the legal claims brought in this investment arbitration; that is, they have no jurisdiction to determine whether the foregoing measures, and other measures enumerated in the Request and Ancillary Claims, violated the provisions of the BIT.
147.
For the reasons mentioned above, the Tribunal finds the Respondent's objection that the Tribunal lacks competence with respect to the Claimants' claims in relation to the restrictions on natural gas export and the rerouting of natural gas volumes to the domestic market unfounded. The objection is accordingly dismissed.

4. Third objection to jurisdiction - the claim regarding the obligation to pay royalties on gas exports without deducting the Export Withholdings has become moot

a. The Parties Positions

i. The Respondent

148.
Argentina contends that the Claimants' claim regarding the obligation to pay royalties on gas exports without deducting the Export Withholdings, which the Claimants allege that Argentina through Law No.25.561 (the Emergency Law) had imposed, has become moot since on 5 June 2007 (prior to the date the second ancillary claim was filed), the Supreme Court of Justice of the Argentine Republic ordered the Province of Neuquén to refrain from requiring MASA the payment of the difference for royalties resulting from the application of Decrees N° 225 and 226 of 2006 of the Provincial Executive Branch, until a final judgment was rendered.
149.
On 29 November 2007, the Executive Branch of the Province of Neuquén repealed these Decrees by issuing Decree N° 2200/07. On 12 August 2008, the Supreme Court of Justice of the Argentine Republic declared terminated the judicial proceeding on the grounds that the Province of Neuquén and MASA had claimed the court to declare that the issue had become moot.

ii. The Claimants

150.
The Claimants assert that Argentina’s objection that the Claimants' claims with respect to the Province of Neuquén's practice of charging excess royalties on natural gas exports are moot is irrelevant. Provincial Decrees 225 and 226 of 2006 concern royalties on domestic sales of hydrocarbons; Law 25,561 remains in effect and continues to apply to natural gas exports.

b. The Tribunal's analysis

151.
The Claimants' assertion, according to which Provincial Decree 225 and 226 of 2006 concern royalties on domestic sales of hydrocarbons and that Law 25,561 remains in effect and continues to apply to natural gas exports, has not been rebutted by Argentina. Argentina's Counsel remarked that this claim is closely linked to the merits and that this objection will be dealt with at the merits phase76, but this did not finally occur. Consequently, the objection is unfounded. The objection is accordingly dismissed.

5. Fourth objection to jurisdiction - the tax matters are inadmissible pursuant to the BIT

a. The Parties Positions

i. The Respondent

152.
Fourth, Argentina emphasizes that pursuant to the treaty, tax matters can only be submitted to investment dispute resolution mechanisms contemplated in the BIT if the following is alleged: (a) that there has been an expropriation; (b) that transfers related to an investment have not been permitted; or (c) that an investment agreement or authorization has been violated.
153.
Article XII of the BIT sets forth that:

"1. With respect to its tax policies, each Party should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party.

2. Nevertheless, the provisions of this Treaty and in particular Article VII and VIII, shall apply to matters of taxation only with respect to the following:

a) expropriation, pursuant to Article IV;

b) transfers, pursuant to Article V; or

c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article VII (1) (a) or (b),

to the extent they are not subject to the dispute settlement provisions of a Convention for the avoidance of double taxation between the two Parties, or have been raised under such settlement provisions and are not resolved within a reasonable period of time."

154.
Articles VII and VIII of the Treaty mentioned in Article XII establish systems for the resolution of investor-host State disputes and of disputes between signatory member States, respectively.
155.
Argentina asserts that this case does not involve any of the above referred three issues. First, the imposition of export withholdings did not cause the expropriation of the Claimants’ legal and contractual rights, since the Claimants transferred those export duties on to their Chilean customers. Second, there is no investment agreement or authorisation between the Claimants and the Argentine Republic. Finally, in connection with the question of transfers (item b), MEDA and MASA have not filed any complaint about this issue.
156.
Although the first paragraph of Article XII of the BIT states that "[w]ith respect to its tax policies, [the State] should strive to accord fairness and equity in the treatment of investment of nationals and companies of the other Party", Argentina argues that, despite that "lax duty of acting with fairness and equity in connection with tax policies,"77 Article XII provides that only the above mentioned three issues authorize the use of the mechanisms contemplated in Articles VII and VIII of the BIT.
157.
The Claimants cannot, says Argentina, even claim that their alleged investments were not accorded fair and equal treatment. The text of Article XII is clear as regards two aspects. First, that in the case of tax matters the "duty to give a fair and equal treatment" is merely "an effort." Second, it is also clear that "notwithstanding" that "effort," the BIT dispute resolution mechanisms are "only available" for a series of issues not including the allegation of "unfair and inequitable treatment."
158.
Moreover, Argentina asserts that for an investment agreement to exist, it must contain an international element. In investment agreements, the parties agree upon a special regime for the treatment of the foreign investment with one or several elements that "internationalise" that agreement.
159.
On the one hand, the concessions invoked by the Claimants have no international element. The law applicable to those concessions is Argentine law. It was established that any dispute arising out of those concessions would be submitted to the local courts. Therefore, they may not be considered investment agreements. On the other hand, Claimants have not proved that, at the time they submitted their claim, there was any agreement or instrument between Argentina and MEDA.
160.
The Sierra Chata Concession is not an investment agreement. The Sierra Chata Concession as well as other hydrocarbons concessions are contracts governed by the Argentine legislation without any international element that might turn them into an investment agreement.

ii. The Claimants

161.
The Claimants contend that their claim regarding Export Withholdings and excess royalties involves: (i) Argentina’s expropriation of specific legal and contractual rights and revenues; (ii) Argentina’s failure to observe and comply with investment agreements (such as the Hydrocarbon Concessions and Contracts); and (iii) Argentina’s unfair and inequitable treatment of the Claimants’ investment.
162.
First, Argentina's decision to establish Export Withholdings, either by itself or in conjunction with other measures, can constitute a measure "tantamount to expropriation" under the BIT.
163.
Second, the Claimants argue that it is not correct that the first paragraph of Article XII of the US-Argentina BIT ("each Party should strive to accord fairness and equity in the treatment of taxation") eliminates the "fair and equitable treatment" standard set forth by Article II of the BIT. Even though it may be a soft obligation, it is nevertheless an enforceable obligation under international law like the obligation to negotiate in good faith. Argentina failed to provide fair and equitable treatment to the Claimants' investment in Argentina by withholding commitments expressly exempting the Claimants from Export Withholdings and violating commitments to charge a maximum royalty rate of 12 % on natural exports.
164.
Moreover, the Claimants argue that Argentina imposed the Export Withholdings and excess royalties in an inequitable and discriminatory manner against the Claimants. In addition to the taking of the Claimants’ legal and contractual rights by imposing the Export Withholdings and excess royalties on exports, Argentina’s treatment of the Claimants’ investment in relation to the Export Withholdings has been discriminatory, because the taxes: (i) were designed to compensate the banking sector for losses caused by other government measures; and (ii) targeted businesses of a specific nature, which is precisely the standard that the Legal Framework and the Hydrocarbon Concessions and Contracts used for excluding the applicability "of discriminatory taxes."
165.
In the Claimants' view Article XII of the BIT does not deprive the Claimants of their right to bring a claim under Article VII for Argentina’s violation of the standards provided by Articles II and IV of the BIT. The provision on expropriation in Article IV is made directly relevant by the terms of Article XII (2), which expressly refers to Article IV. Article IV, in turn, provides that one of the conditions for a legal expropriation is compliance with the provisions of Article II (2) which include fair and equitable treatment. The Claimants' claim regarding the imposition of Export Withholdings and excess royalties on export constitutes an expropriation claim.
166.
Third, the Claimants assert that the imposition of the Export Withholdings and excess royalties on exports resulted in the violation of commitments undertaken by Argentina under the BIT. As Argentina itself acknowledges, ICSID jurisdiction is available, and the provisions of the BIT apply (including those related to dispute resolutions mechanisms) if the dispute concerns an expropriation. Claimants’ claim regarding the imposition of Export. Withholdings and excess royalties on exports constitute an expropriation claim.
167.
The Claimants contend that the mere assertion of an expropriation is enough for the Tribunal to find jurisdiction in this case. Whether an expropriation of specific legal and contractual rights and revenues has occurred is not an issue for the Tribunal to decide at his stage of the proceedings, but should instead be decided at the merits phase. As for jurisdictional objections, ICSID tribunals must consider the claims as alleged by the Claimants in their Memorial, and jurisdiction exists to consider the dispute included in the Claimants’ Memorial since the Claimants have prima facie shown that they have an expropriation claim. The dispute relates to an expropriation of legal and contractual rights and revenues, and consequently, falls within the scope of Article XII (2) (a) of the BIT.
168.
Fourth, the Claimants assert that the Hydrocarbon Concessions and Contracts are a relevant part of the Claimants’ dispute and constitute investment agreements under the BIT for purposes of the tax-related claims under Article XII of the BIT. Nowhere in the BIT is the term "investment agreement" defined. It was not used as a special term with a special meaning or as a term of art. The purpose is simply by using the term "investment agreement" to exclude ordinary commercial contracts that are not related to an investment.
169.
The Claimants were granted rights to natural resources owned by the Federal or Provincial States. The Claimants' rights were conferred by virtue of a sovereign power which, of course, takes them out of the realm of ordinary commercial Concession Contracts. Thus the Claimant's Permits and concessions establish a legal relationship between them and the Argentine State.
170.
Contrary to Argentina’s assertion, no "international" element is required for the Hydrocarbon Concessions and Contracts to qualify as an investment agreement. There is no language in the BIT that requires any international element for an investment agreement. Even if an international element were necessary, it is present in this case. MEDA and MASA qualify as United States nationals under the BIT, and thus imbue the Hydrocarbon Concessions and Contracts with an international character. Moreover, other foreign companies and their subsidiaries were and are parties to the Hydrocarbon Concessions and Contracts. In addition, Argentina granted the Hydrocarbon Concession and Contracts as part of a movement to attract foreign companies to invest in Argentine hydrocarbon fields.
171.
Thus, and "without prejudice to the fact that jurisdiction can also be affirmed on other grounds" as respects Article XII of the BIT, the failure to observe the commitments undertaken by Argentina in those "investment agreements" with respect to tax issues constitutes a prima facie violation of the standards of protection established by the BIT, which gives this Tribunal jurisdiction under the BIT.

b. The Tribunal's analysis

172.
Article XII (2) of the BIT provides as follows:

"Nevertheless, the provisions of this Treaty, and in particular Article VII and VIII, shall apply to matters of taxation only with respect to the following:

(a) expropriation, pursuant to Article IV,

(b) transfers, pursuant to Article V; or

(c) the observance and enforcement of terms of an investment agreement or authorization as referred to in Article VII (1) (a) or (b),

to the extent they are not subject to the dispute settlement of a Convention for the avoidance of double taxation between the two parties, or have been raised under such settlement provisions and are not resolved within a reasonable period of time."

173.
Thus, the Tribunal has no jurisdiction for tax matters except in the three situations referred to in Article XII (2) (a-c). The Claimants' have not filed any complaint about the question of transfers (item b).
174.
The Claimants have made out a prima facie case that the GOA measures may have resulted in an expropriation of the Claimants' investment or that there may be an investment agreement as that notion may be generally understood - the notion in question is not defined by the BIT. Accordingly, to establish the Tribunal's jurisdiction, the Claimants can rely on the exceptions stated in Article XII (2).
175.
Nevertheless, the question whether the Claimants' claim regarding Export Withholdings and excess royalties is an expropriation pursuant to Article IV of the BIT is inextricably linked to the merits. In the Tribunal's view, the imposition of Export Withholdings or excess royalties may prima facie amount to an expropriation of specific legal and contractual rights and revenues. Whether such expropriation has occurred is not an issue for the Tribunal to decide now. The Tribunal cannot decide at this point on its jurisdiction on these issue
176.
At this stage, the scope of inquiry is limited to whether the Claimants' allegations, if true, could constitute an expropriation. The Claimants need not establish at that stage either that the facts alleged are true or that such facts, if proved, would necessarily violate the BIT. Conversely, only in case that the Claimants' allegations are clearly untrue or, even if true, the Claimants' allegation that their claims regarding Export Withholdings and excess royalties would be manifestly unfounded, the Tribunal would adopt a decision on its jurisdiction (see infra ¶864).
177.
Also, the question whether the Hydrocarbon Concessions and Contracts constitute investment agreements under the BIT for purposes of the tax-related - claims under Article XII of the BIT, is inextricably linked to the merits. Confronted with the opposing views of the parties, this Tribunal points out that what matters at the jurisdictional stage is whether the claims submitted, if they were to prove well founded, would fit into the jurisdictional parameters of the BIT. Therefore we must consider the merits to solve these issues of jurisdiction.

6. Fifth objection to jurisdiction - Absence of Evidence of MEDA's Alleged Investment

a. The Parties’ Positions

i. The Respondent

178.
Argentina contends that the relevant law to determine the acquisition of the rights invoked as investment is the law of the host State. Thus, the exact nature of the rights invoked by the investor is to be determined according to the law of the host State and then it must be analyzed whether those rights are included in the definition of investment established in the relevant investment treaty. Therefore, the applicable law to determine MEDA's acquisition of the rights it invokes as investment in Sierra Chata is Argentine law.
179.
Argentina submits that MEDA claims that it acquired its interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession through assignments in 1996 and 1997 from BHP Petroleum (Argentina) S.A. and Mobil Argentina Limited ("MAL", previously named Monument Exploration Limited). However, the assignment from BHP Petroleum (Argentina) S.A. to MEDA was authorised by the Executive Branch only in 2005, and the assignment from MAL to MEDA has not yet been authorised by the Executive Branch.
180.
According to MEDA the BHP-MEDA Purchase and Sale Agreement is one of the documents evidencing the acquisition of its interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession. By means of this agreement, the parties agreed that BHP Petroleum (Argentina) S.A. would transfer 90% of its 31.1091% interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession to MEDA.
181.
Argentina contends that in accordance with Argentine law, such permits and concessions may only be assigned upon prior authorisation of the federal or provincial Executive Branch. Indeed, Law No. 17,319 (hereinafter "Hydrocarbons Law") establishes that "[p]ermits and concessions awarded under the provisions of this law may be assigned, with a prior authorisation of the Executive Branch, to such persons who possess the qualifications and comply with the conditions and requirements established for permit or concession holders, as the case may be." [Emphasis added]. In addition, Law No. 26,197 of 3 January 2007 provides that, as from the enactment of that law, the provinces will become counterparties to the exploration permits and the hydrocarbon exploitation and transportation concessions.
182.
However, the assignment from BHP Petroleum (Argentina) S.A. to MEDA was only authorised by Administrative Decision No. 459/2005, which was published in the Argentine Official Gazette on 9 August 2005. In addition, MEDA has not produced in this arbitration the instruments which would prove that it is the holder of the Exploration Permit, the Exploitation Concession and the Transportation Concession, to wit: the final notarial deeds of assignment, which had to be submitted to the enforcement authority pursuant to Administrative Decision No 459/2005.
183.
Moreover, Argentina submits that the Claimants also invoke an assignment from MAL to MEDA as source of the acquisition of their interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession. Argentina also contends that this assignment is subject to authorisation of the Executive Branch, which authorisation has not yet been granted.
184.
Argentina concludes that the documents presented by the Claimants in response to the request for evidence by the Argentine Republic fail to show that MEDA had acquired its alleged interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession by the date the Request for Arbitration was filed - 19 December 2003. It is clear from the documents presented by the Claimants that the assignments invoked by them were subject to the authorisation of the Federal Executive Branch. One of the assignments alleged by the Claimants — the assignment from BHP Petroleum (Argentina) S.A. to MEDA — was authorized in 2005 and the final notarial deeds of assignment have not yet been submitted. The other assignment invoked by — the assignment from MAL to MEDA — has not yet been authorised by the Executive Branch.
185.
Jurisdiction must be established at the time of filing of the claim. Therefore, since the Tribunal had no jurisdiction over MEDA's claim at the time the Request for Arbitration was filed in 2003 - as it has not been proven that MEDA had acquired its alleged investment by that date - the Tribunal has no jurisdiction to entertain MEDA’s claims for acts or omissions of the Argentine Republic occurring prior to MEDA’s acquisition of its alleged investment. Thus the Tribunal has no jurisdiction over any of MEDA’s claims.

ii. The Claimants

186.
The Claimants contend that the GOA has consistently recognised (and continues to recognise) the Claimants as the rightful holders of a 50.9956% working interest in the Sierra Chata Concession. For Argentina now to attempt to deny the Claimants, ownership interests in their investments constitutes an abuse of rights (abus de droit) and violates the principles of good faith, estoppel and venire contra factum proprium non valet under both international and Argentine law.
187.
MEDA acquired its working interest in the title to Sierra Chata through two transactions. First, it acquired 31.1091% from BHP Petroleum (Argentina) S.A. in 1996 and 1997 (the "BHP Assignment"). Second, it acquired 19.8865% in 1998 from MAL as a result of a bulk transfer of assets within Mobil Corporation (the "MAL Transfer").
188.
On 18 September 1996, MEDA and Mobil Oil Exploration and Production Southeast Inc. executed a Sale and Purchase Agreement (the "BHP Assignment Agreement") with BHP Petroleum (Argentina) S.A., BHP Petroleum (Argentina) Inc., BHP (Americas) Inc. and BHP Petroleum (GOM) Inc., through which BHP Petroleum (Argentina) S.A. assigned MEDA 90% of its working interest (a 27.99819% interest) in the title to the Sierra Chata Concession. Subsequently, BHP Petroleum (Argentina) S.A. and BHP Petroleum (Argentina) Inc. assigned their remaining working interest in the title to Sierra Chata (3.11091%) to MEDA.
189.
MEDA complied with all technical and financial conditions required by law to hold its working interest in the title to the Sierra Chata Concession, but Argentina delayed issuing an authorization of the assignment for more than eight years, despite acknowledging in 2000 that: (i) MEDA was duly registered in the Registry of Oil Companies, thus meeting the technical conditions required by the applicable regulations to hold hydrocarbon working interests; and (ii) MEDA complied with the required business solvency parameters and had a satisfactory economic and financial condition. A failure to meet these conditions constitutes the only valid reason for the Argentine Government to delay or refuse to issue an authorization.
190.
In 2005, through Administrative Decision 459/05, Argentina finally issued the formal approval of the BHP-MEDA Transfer that MEDA had applied for in 1996 and 1997. Administrative Decision 459/05 confirmed that MEDA met the statutory conditions required under Article 72 of the Hydrocarbons Law to hold an interest in Sierra Chata. It also authorized BHP Petroleum (Argentina) Inc. and BHP Petroleum (Argentina) S.A. to assign 100% of their working interest in the Sierra Chata Concession (31.1091%) to MEDA. Under Article 2 of that regulation, the parties had 60 business days to submit the public deed implementing the assignment.
191.
To execute a public deed, however, Article 74 of the Hydrocarbons Law requires the submission of a certificate showing that no taxes in connection with the assigned working interests remain unpaid. Although the Claimants have diligently requested this certificate, the Province of Neuquén has arbitrarily refused to issue it due to a dispute over the Province’s unreasonable and arbitrary calculation of royalties that also involves most of the oil and gas companies operating in Neuquén.
192.
Through a letter to the Secretary of Energy on 21 October 2005, MEDA informed the Argentine Government of the Province of Neuquén’s refusal to issue the tax certificates required to obtain a public deed showing MEDA’s title in Sierra Chata. In that letter, MEDA also requested an extension of the 60-day term to obtain the tax certificates from the Province of Neuquén. MEDA reiterated its request on 21 December 2005, but the Argentine Government failed to respond whatsoever to MEDA’s requests.
193.
The Province of Neuquén has challenged royalty payment calculations made not only by MEDA and MASA, but also by almost all companies operating in the Province. As a result, MEDA and MASA have been unable to register the deeds for their title in Sierra Chata.
194.
As a result of reorganization by Mobil Corporation of its affiliates’ holdings, effective on 9 December 1998, MAL assigned all of its assets and liabilities, including its working interest in the Sierra Chata Concession (19.8865%), to MEDA.
195.
On 10 December 1998, MAL and MEDA informed the Argentine Government of this assignment in accordance with the provisions of Article 15 of Decree 1969/93, through which the Argentine Government granted the Chihuidos Exploration Permit.
196.
As a result of another corporate reorganization in 2004, MEDA assigned to MASA its assets and liabilities, including its 50.9956% interest in Sierra Chata. In accordance with the rules set under Article 15 of Decree 1969/93, the Claimants notified the Argentine Government of this assignment on 22 December 2004.
197.
It is notable that inter-affiliate transfers, such as the MAL Transfer and the MEDA-MASA Transfer, do not require authorization from the Argentine Government. Article 15 of Decree 1969/93 provides that parties may assign portions of their interest to company affiliates simply by notifying the competent authority, which the parties promptly did upon completing the transfer. Because no formal authorization of the transfer by the Argentine Government is required, Argentina’s allegations that the Executive Branch did not authorise those transfers are not relevant to the lawfulness of the transfers under Argentine law.
198.
In addition to showing that assignments between affiliates do not require government approval, Article 15 of Decree 1969/93 establishes that the Energy Secretariat merely takes note of inter-affiliate assignments (rather than formally authorizing them) and that the assignor remains jointly liable with its assignee affiliate for the assigned interest in question. Thus, when making an inter-affiliate assignment, it is not necessary to request approval from the government; but if the parties want to dispense with joint liability, then they need to seek government approval exclusively for that purpose.
199.
Even if Argentina were correct that executive authorization had been required for the validity of the transfers, and not simply to enable the parties to waive joint liability, the Argentine Government, and with the enactment of Law 26,197. which transferred the eminent domain of the hydrocarbon reserves to the Provinces and, as a result, all concessions granted by the Federal Government were also transferred to the provincial authorities, the Province of Neuquén, have delayed granting authorizations for these transfers. They failed to authorise these transfers despite the fact that both MEDA and MASA have been duly registered with the Argentine Registry of Oil Companies and have complied with all technical and financial conditions required by law to hold a working interest in the Sierra Chata Concession.
200.
Argentina’s objection that the Claimants’ investment does not accord with the formalities of Argentine law must fail for at least three reasons. First, for more than ten years, the Argentine Government has repeatedly acknowledged that the Claimants own a working interest in Sierra Chata; consequently, Argentina is estopped from denying the lawfulness of the Claimants’ investment. Second, any failure to register formal title of the Claimants’ interest in Sierra Chata lies entirely with the Argentine Government. Argentina cannot now benefit from its own wrong in order to deny the Claimants’ standing to claim for damage to their investment under the BIT. Third, the Claimants complied with all statutory conditions to obtain the title. Thus, the Government’s failure to grant the authorizations and tax certificates in question and its current challenge of the Claimants’ standing in Sierra Chata on the grounds that the Claimants have allegedly failed to comply with the requirements of the Hydrocarbons Law, a charge that first arose in the context of this proceeding, constitute an abuse of rights (ahus de droit) under Argentine and international law.
201.
The principle of estoppel bars Argentina from challenging the Claimants' standing to claim for their interest in the Sierra Chata concession. Although the governing law of this dispute stems from the BIT and international law, it is notable that Argentine law also recognizes the doctrine of venire contra factum proprium, which is similar to the principle of estoppel under international law.
202.
The Argentine Government has consistently and publicly recognised the Claimants as the rightful owners of a working interest in Sierra Chata. In a 2004 report to the House of Representatives, the Chief of Cabinet stated that "MASA is a corporation indirectly owned by Exxon Mobil Corporation. MEDA and MASA are natural gas producers. They hold a hydrocarbon production concession in Sierra Chata, Chihuidos, the Province of Neuquén (in accordance with the Hydrocarbons Law and Decrees 1969/93 and 824/95)...." That the Chief of Cabinet has expressly recognised the Claimants’ interest in Sierra Chata is significant since it was the Chief of Cabinet who was empowered to issue hydrocarbon permits and concessions and to authorise assignments.
203.
Argentina has also addressed re-routing orders in the Neuquina Basin to the Claimants. The Claimants’ only concession holding in the Neuquina Basin is their 50.9956% interest in Sierra Chata; thus, Argentina necessarily directed its re-routing orders to the Claimants’ interest in Sierra Chata, the same interest it now purports to deny.
204.
Through Note SE 1114/04, the Secretary of Energy requested certain information from the operator of the Sierra Chata Concession. The note specified that the Secretary of Energy was sending a copy of the information request to the "other holders" of the Sierra Chat Concession. In recognition of MEDA as one of the "other holders" of the Sierra Chata Concession, the Secretary of Energy sent MEDA a copy of Note SE 1114/04.
205.
The Argentine Government also recognised the Claimants’ interest in Sierra Chata through Resolution SE 599/07, which approved the terms of the Second Gas Agreement that Argentina sought to have producers sign. Annex I of the Second Gas Agreement, which establishes the natural gas volumes that the Argentine Government expected to receive per basin from each natural gas producer, included MASA as a producer in both the Northwestern Basin and the Neuquina Basin. MASA does not hold any interests in the Neuquina Basin aside from its interest in Sierra Chata. Therefore, Annex I confirms that Argentina recognised MASA as a concessionaire in Sierra Chata.
206.
Even the Argentine Supreme Court of Justice has recently recognised MASA as holder of the Chihuidos/Sierra Chata title. In Mobil Argentina S.A. v. Neuquén Provincia del y otro (Estado Nacional), MASA requested injunctive measures against the Province of Neuquén regarding the Province’s calculation of royalty payments. On 5 June 2007, the Supreme Court admitted MASA’s motion and implemented the requested injunctive measures against the Province of Neuquén. In that ruling, the Supreme Court expressly recognized MASA "as co-holder of the production concession of the Sierra Chata area located in the Province of Neuquén."
207.
The Province of Neuquén has also recognised the Claimants as interest holders in Sierra Chata in the following ways: (i) since executing the assignments, MEDA and MASA have paid royalties on their production from the Sierra Chata block and taxes to the provincial government; (ii) in a letter that the Province of Neuquén sent to MEDA on 24 August 2005, the Province refers to MEDA as the "Concessionaire" (iii) the Province of Neuquén has held meetings with MASA regarding the Sierra Chata Concession; (iv) the Neuquén Secretariat of Natural Resources issued Resolution 54/09, Article 10 of which provides for the notification of the Resolution to "all permit and concession holders acting in the Province," and MASA received notice of this Resolution in March 2009. The Province has accepted those payments and not challenged the fact that they are calculated on the basis of the Claimants’ entire interest in the Sierra Chata Concession.
208.
These non-exhaustive examples show that the Argentine Government has consistently acknowledged the Claimants' status as title holders in Sierra Chata for more than a decade.
209.
A State may not rely on its own wrongful actions or omissions as a defence to internationally wrongful conduct. Thus, Argentina’s own acts and omissions prevent it from challenging the lawfulness of the Claimants’ investment in Sierra Chata. The Claimants took every step and fulfilled every requirement necessary to obtain authorization and formal title to their investment in Sierra Chata. Over a period of more than ten years, however, Argentina repeatedly ignored the Claimants’ requests to complete these and other administrative formalities, and due to its own incompetence in processing authorization requests, failed to process the Claimants’ authorization requests in a timely manner, resulting in an undue delay that is unfortunately far too common in the Argentine Government’s assignment authorization process. Argentina cannot now rely on its incompetence to deny the Claimants’ standing in this proceeding. Its attempt to do so constitutes an effort to benefit from its own negligent behaviour in enforcing its legal and administrative rules.
210.
In addition, to relying on its own delay in granting assignment authorizations, Argentina’s reliance on the Province of Neuquén’s failure to grant the Claimants a tax certificate to contest the validity of the BHP-MEDA Transfer is particularly egregious. After the Argentine Government issued Administrative Decision 459/05 approving the BHP-MEDA Transfer, BHP and MEDA unsuccessfully sought to obtain a written certificate showing that there were no outstanding tax liabilities with respect to MEDA’s assigned working interest in Sierra Chata. The Province of Neuquén, however, arbitrarily refused to issue the required certificate based on interpretive disagreements regarding royalty calculations. Although MEDA promptly informed the Secretary of Energy of these circumstances and requested an extension of the deadline for executing the deed formalizing the assignment, the Secretary of Energy failed to respond in any way.
211.
Since 2002, the Province of Neuquén has systematically calculated royalties for all hydrocarbon producers, including the Claimants, in excess of the 12% statutory maximum under Argentine law. As a result, the Province is involved in several legal proceedings with the majority of hydrocarbon producers in the Province’s territory. In an attempt to coerce hydrocarbon producers (including the Claimants) to comply with the Province’s unlawful royalty calculations (which in many cases involve calculating royalties on the basis of prices that exceed the actual sale prices as required by the Hydrocarbons Law), the Province of Neuquén refused to issue the tax certificates necessary to formally register the assignment of working interests, concessions and permits.
212.
Had the Province of Neuquén issued the tax certificates, it still would have had the right to pursue its royalty claims against producers. The tax compliance certificates issued by the federal tax authority, the Administración Federal de Ingresos Públicos("AFIP"), expressly clarify that such certificates "do not affect the AFIP’s surveillance and tax determination powers." As a consequence, the issuance of a tax certificate does not imply that the agency issuing the certificate waives its right to take legal action against the certificate holder to claim for unpaid taxes. In any event, Argentina’s decision to withhold a tax certificate due to its unreasonable royalty calculations has become particularly arbitrary since the Supreme Court in December 2007 ruled that royalties were not taxes.
213.
In summary, the substantial delays that affected the Claimants’ assignment authorization proceedings are entirely attributable to the federal and provincial governments’ bureaucracy, negligence, and misuse of authority in handling those proceedings. Thus, Argentina may not challenge the Claimants’ standing in this proceeding by arguing that the difficulties created by its own agencies and political subdivisions are attributable to the Claimants.
214.
Another reason to reject Argentina’s attempt to contest the Claimants’ standing to claim for damages to their investment in Sierra Chata is that Argentina’s position constitutes an abuse of rights (abus de droit) under Argentine and international law. In this case, the Argentine Government has used its otherwise legitimate authority to approve assignments as a tool to achieve goals unrelated to the legitimate purpose of that authority.
215.
First, the Argentine Government has abused its limited discretion by failing to grant the Claimants the assignment authorisations they sought for over ten years, even though the Claimants complied with the technical and financial conditions for obtaining authorisations. Second, in order to gain leverage in its attempt to force producers to pay unlawfully excessive royalty payments, the Province of Neuquén has arbitrarily refused to issue the tax compliance certificate. The Claimants need to notarize title to their investment. Third, Argentina has violated the abuse of rights doctrine by attempting to invoke a purported failure to comply with the formalities of its internal law to undermine the Claimants right to pursue its claims under the BIT and the ICSID Convention.
216.
Accordingly, Argentina’s attempt to deny treaty protections to the Claimants’ investment in Sierra Chata constitutes an abuse of Argentina’s otherwise reasonable right to expect that investors will comply with formalities of host state laws.

b. The Tribunal's analysis

217.
Even though the BHP-MEDA transfer was not approved until more than two years after the request for arbitration was filed by the Claimants, Argentina performed several acts that implied acknowledgement of MEDA's and MASA's concessionaire status.
218.
First, the fact that the Government has uninterruptedly collected taxes and royalties arising from a certain legal relationship constitutes a clear admission on the part of the Government of that legal relationship with the taxpayer. Accordingly, the fact that MEDA and MASA have paid, export withholdings, income taxes and royalties since 1998 in relation to the Sierra Chata Block, without the Federal Government or the Province of Neuquén ever objecting to their standing to do so, implies an acknowledgment of their status as concessionaires over that block.
219.
Second, Argentina has given numerous orders to MEDA and MASA in order to implement its natural gas export curtailment measures and the routing of the so-curtailed volumes to the domestic market, the so-called "re-routings".78 Such a decision implies an admission by Argentina of the Claimants’ status as concessionaires; otherwise Argentina would have lacked jurisdiction and the orders would not have reflected the actual state of affairs.
220.
However, Argentina imparted such orders, thus reinforcing MEDA and MASA’s good faith belief that they would be afforded a treatment consistent with their status as concessionaires.
221.
Third, through Note 1114/04 sent to MEDA on 21 September 2004, the Secretariat of Energy impliedly considered MEDA as one of the "titleholders" of the Sierra Chata Block concession.79 In fact, this note was aimed at demanding certain information.
222.
Fourth, in the numerous reports submitted to Congress between the years 2004 and 2007, the Cabinet Chief of the Federal Executive repeatedly stated that:

"MASA and MEDA are natural gas producers. They hold a hydrocarbon exploitation concession in "Sierra Chata", Chihuidos, Province of Neuquén (pursuant to the Hydrocarbons Law and Decrees Nos. 1969/93 and 824/95); and an exploitation contract in the Aguaragüe Area Province of Salta (Decree No. 2446/92)"80

223.
This goes to confirm that the Argentine Government has recognised the Claimants' ownership of the relevant investments over a decade and has shown, by specific actions, that they effectively held the status of concessionaires of the exploration, exploitation and transportation of hydrocarbons in the "Sierra Chata" Block. Moreover, in this case, unlike other acts mentioned above, the admission of the Concessionaires’ status was not privy to the State and the Claimants only, but was instead effected in a public act before the Argentine Congress.
224.
The question before this Tribunal is first, whether the acts described above constitute a series of prior actions, which pursuant to the principle of good faith together with the doctrine of venire contra factum proprium non valet, also recognised by Argentine law, cannot be contradicted by a later act denying MEDA and MASA’s status as concessionaires of the "Sierra Chata" Block. If this question is answered in the affirmative Argentina's fifth objection must already on that ground be rejected.
225.
The Tribunal agrees with Argentina that investments, as defined in the BIT, must be made and carried out in accordance with the law of the host state. Ordinarily, then, foreign investors must comply with any procedures or formalities prescribed by the host state’s laws for assignments, transfers, acquisitions, and so forth. The principal such formality on which Argentina predicates its jurisdictional objection in this investment arbitration is the internal-law requirement that acquisitions and assignments receive the prior authorization of the Executive Branch authorities, provincial or federal, as the case may be.
226.
Because the Claimants allegedly did not comply with this requirement as to the relevant acquisitions and assignments, they cannot, according to Argentina, under the BIT assert rights relative to concessions, contracts, export permits and other investments they made, which form the subject-matter of this arbitration.
227.
However, a host state may under international law not invoke its own failure or nonfeasance to defeat rights under the BIT, a fortiori if it has not acted in good faith. According to the Claimants’ allegations, as to which sufficient evidence has been given by them, Argentina’s federal and provincial authorities repeatedly and negligently failed to complete, or delayed for years, certain formalities and administrative actions required by Argentina’s own law, for example, approval by Executive Branch authorities or instrumentation of public deeds.
228.
The Tribunal finds that the principle of good faith and the doctrine of venire contra factum proprium prevent Argentina from denying the validity of the Claimants’ acquisition or ownership of the above interests and others constituting its investment. Argentina has consistently and repeatedly, for about a decade recognised and acted on the basis of the validity of the Claimants’ title. By its own actions and those of its provincial authorities, for which it clearly bears responsibility under international law, it has shown that it regards the Claimants as the rightful holders of title. The conduct of any State organ shall be considered an act of that State under international law, whether the organ exercises legislative, executive, judicial or any other functions, whatever position it holds in the organization of the State, and whatever its character as an organ of the central Government or of a territorial unit of the State.81 Argentina cannot now be heard to deny that title.
229.
The Tribunal finds that inter-affiliate transfers, such as the MAL-MEDA Transfer and the MEDA-MASA Transfer, do not require authorisation from the Argentine Government, since Article 15 of Decree 1969/93 provides that parties may assign portions of their interest to company affiliates simply by notifying the competent authority, which the parties promptly did upon completing the transfer.82 Because no formal authorisation of the transfer by the Argentine Government is required, Argentina’s allegations that the Executive Branch did not authorise these transfers are not relevant to the lawfulness of the transfers under Argentine law. In addition to showing that assignments between affiliates do not require government approval, Article 15 of Decree 1969/93 establishes that the Energy Secretariat merely takes note of inter-affiliate assignments (rather than formally authorizing them) and that the assignor remains jointly liable with its assignee affiliate for the assigned interest in question. Thus, when making an inter-affiliate assignment, it is not necessary to request approval from the government; but if the parties want to dispense with joint liability, then they need to seek government approval exclusively for that purpose.
230.
For the reasons mentioned above the Tribunal finds Argentina’s fifth objection unfounded. The objection is accordingly dismissed.

7. Sixth objection to jurisdiction: - Transfer of interest from MEDA to MASA

231.
On 21 December 2004, MEDA and MASA entered into a Transfer of Going Concern Agreement (hereinafter "MEDA-MASA Transfer Agreement") by which MEDA agreed to transfer to MASA all of the assets and liabilities of its Argentine Branch, including its interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession in the Chihuidos Block. Pursuant to the MEDA-MASA Transfer Agreement the transfer and reorganization to be carried out thereunder became effective from 31 December 2004.83

a. The Parties’ Positions

i. The Respondent

232.
Argentina contends that like the assignments referred to in their fifth objection; the assignment from MEDA to MASA is subject to the prior authorisation of the Executive Branch. In this regard, in the MEDA-MASA Transfer Agreement MEDA undertook to request authorisation from the Executive Branch to carry out the assignment of the Exploration Permit, the Exploitation Concession and the Transportation Concession. Moreover, such agreement provided that if the Executive Branch refused to grant the requested authorisation, MEDA would resume in its own name the exercise of the rights and obligations derived from its interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession. Furthermore, MEDA’s 2005 to 2008 financial statements informed that the assignment was pending approval from the Secretariat of Energy. However, the Claimants have not produced the letter-requesting authorisation from the Executive Branch to carry out the aforesaid assignment.
233.
If MEDA had acquired prior to the filing of the Request for Arbitration the interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession it alleges as investment and had then validly assigned those interests to MASA, it would not be entitled to pursue any claim as regards those interests for measures adopted after such interests were transferred to MASA. MEDA has not either proven to have validly assigned its alleged interest to MASA.
234.
The Claimants state to have excluded the ICSID claim from the transfer. However, even if MEDA were entitled to claim for measures adopted before the transfer of its alleged investment, it would not be entitled to claim for measures adopted after such transfer. Indeed a tribunal has no jurisdiction over a bilateral investment treaty claim for acts or omissions occurring after the transfer of the relevant investment. As stated by MEDA itself, since the transfer to MASA the Argentine Branch "has not performed any operation," "does not have any assets, liabilities or income" and "it is also the intention of the Head Office that the Branch do not operate in the foreseeable future." Therefore, MEDA is not entitled to pursue any claim for measures adopted after the transfer of its alleged investment.
235.
MASA is not entitled either to pursue claims in relation to the Exploration Permit, the Exploitation Concession or the Transportation Concession in the Chihuidos Block. In the first place, MASA may not invoke an investment other than the investment alleged when it filed its claim. This means that MASA may not invoke as investment its alleged interests in the Chihuidos Block because when it filed its claim it invoked as investment its interests in the Aguaragüe Block. Secondly, MASA has not proven to have acquired its alleged interests in the above-mentioned permit and concessions. Finally, even if MASA had acquired such interests, this would have occurred after the filing of the Request for Arbitration, which means that the Tribunal would nonetheless have no jurisdiction over MASA’s claims as regards those interests.
236.
In return for the transfer of the going concern, MEDA acquired a 54.61% shareholding in MASA. This shareholding does not entitle MEDA to pursue derivative or indirect claims for measures adopted after the transfer in relation to the alleged interests of MASA in the Exploration Permit, the Exploitation Concession and the Transportation Concession in the Chihuidos Block.
237.
Firstly, MEDA may not invoke an investment other than the investment alleged when it filed its claim. This means that MEDA may not invoke as investment its shareholding in MASA, because when it filed its claim it invoked as investment its alleged interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession in the Chihuidos Block. Secondly, MEDA may not pursue a claim for rights that its subsidiary has not proven to have acquired. In this regard, MASA has not proven to have acquired its alleged interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession and, even if it had acquired such interests, this would have occurred after the filing of the Request for Arbitration. Finally, MEDA is not entitled to claim for rights, which do not belong to it. That is to say, if the transfer of MEDA’s alleged interests in the Exploration Permit, the Exploitation Concession and the Transportation Concession to MASA were valid, after such transfer the invoked rights would belong to MASA and not to MEDA.
238.
As regards this last issue, an investment in shares is protected by the Treaty but the shareholder has only a valid claim under the Treaty to the extent that its rights as shareholder are affected by measures of the Government. There is no definition in international law of the rights of a shareholder.
239.
Therefore, it is necessary to refer to the rules of municipal law to establish the rights that a shareholder acquires through an investment in shares. In the Barcelona Traction case, the International Court of Justice ("ICJ") specifically dealt with this issue.84
240.
A key issue that the ICJ had to consider in that case was how to transplant the legal concept of shareholder in a corporation from domestic law to international law. The answer provided by the Court was that the essential characteristics of that concept must be preserved when it forms part of an international claim. Investment treaty tribunals must provide the exact same answer.
241.
The usual reference to shares as a form of protected investment in the first article of investment treaties solves the question of whether a shareholder in a local company has standing to file a claim under an investment treaty. This reference to shares says nothing with respect to the substantial rights related to the shares in a company. This question may only be solved by the lex societatis. Neither investment treaties nor international law regulates the rights of shareholders.
242.
In municipal legal systems, "the fiction of corporate personality" is taken rather seriously. Indeed, it is only ignored when it is found to be an instrument of fraud.
243.
Every legal system that recognises limited liability company structures necessarily draws a distinction between the company and its shareholders. A shareholder cannot, for instance, seize a physical asset of the company in return for relinquishing its share with an equivalent value. This would amount to misappropriation or theft. Shareholders have no rights in rem over the assets of the company. The company holds the assets for its own account and in its own name. A company does not hold
244.
As regards the derivative or indirect claim that MEDA seeks to pursue in this arbitration proceeding, it is also worth remembering the conclusive words of the ICSID Tribunal in the Consorzio Groupement L.E.S.I. - DIPENTA v. Algeria case

"Il est évident pour le Tribunal arbitral qu’il ne peut entrer en matière sur une réclamation si celle-ci lui est soumise par un sujet de droit qui n’est pas lié par le contrat sur lequel elle repose. L’affirmation est si essentielle qu’elle n’a pas besoin d’etre spécialement documentée. Peu importent les liens économiques qui peuvent exister entre les entreprises; ainsi, la société-mére ne pourrait réclamer des prestations revenant contractuellement á sa société fille, même si celle-ci dépend totalement d’elle, á moins de circonstances très particulières qui ne sont pas alléguées en l’espéce. Ce sont ces parties qui ont choisi de recourir pour des motifs qui leur appartiennent á des structures juridiques différentes; elles ne peuvent ensuite demander á l’autre partie d’en faire purement et simplement abstraction."

245.
To conclude, neither MEDA - directly or indirectly - nor MASA - directly are entitled to pursue claims in relation to the Exploration Permit, the Exploitation Concession and the Transportation Concession in the Chihuidos Block for measures adopted after the transfer of the going concern from MEDA to MASA. The Tribunal has no jurisdiction to entertain such claims.

ii. The Claimants

246.
The Claimants argue that the MEDA-MASA transfer on 31 December 2004 merely altered the form in which the Claimants held their investment in Argentina through changes in asset ownership and shareholding of two whole-owned subsidiaries of Exxon Mobil Corporation.
247.
The Claimants contend that the BIT is particularly clear in providing in Article I (3) that "[a]ny alteration of the form in which assets are invested or reinvested shall not affect their character as investment." Moreover, no issue of jurisdiction under the ICSID Convention arises from a transfer between original claimants for reasons unconnected with the claim, even if the measures forming the basis of the claim accrue after the transfer. It follows that the alteration of the form of MEDA’s investment from a direct ownership of the underlying assets to an indirect ownership through its stake in MASA’s capital stock does not affect MEDA’s standing to claim for damages to that investment. This also applies to MASA. That MASA, an original claimant in these proceedings, received its interest in Sierra Chata, an investment present since the commencement of these proceedings, through a bulk transfer in the form of universal succession does not preclude MASA from pursuing its claim with respect to the "inherited assets."
248.
In short, a company’s decision to restructure its assets and shareholding structure does not generally deprive that company or its subsidiaries of their rights under the BIT. Three consequences follow from this conclusion: (A) MEDA may claim for damage caused by Argentina’s measures taken toward its investment before the MEDA-MASA Transfer; (B) from December 31, 2004, forward, MASA may claim for damage caused by Argentina’s measures toward the portion of the investment it obtained from MEDA in 2004; and (C) MEDA, without duplication, may claim as a shareholder of MASA for damage caused by measures that affected MASA’s investments after the MEDA-MASA Transfer.
249.
It follows under investment treaty law that investors may retain standing under a bilateral investment treaty when they have transferred sold, or assigned their investment after commencing international proceedings. It is generally recognised that there is jurisdiction under the ICSID Convention if the Claimant was an investor at the time of instituting ICSID proceedings. Any assignments or transfers after that time will not affect the investor's standing to claim under the ICSID Convention.
250.
In this case, MEDA directly owned its investment in Sierra Chata as of the date of initiating proceedings, and MEDA continued to directly own that interest until the MEDA-MASA Transfer in 2004. When making the MEDA-MASA Transfer, MEDA specifically reserved its BIT claims for measures preceding that transfer. The express exclusion of MEDA’s BIT claims from the MEDA-MASA Transfer was intended to preserve MEDA’s right to pursue the claims up to the date of the Transfer and to demonstrate that the Claimants were not attempting to duplicate their claim for damages. MEDA’s direct ownership interest imbues it with standing to claim damage caused to its investment in Sierra Chata prior to 31 December 2004.
251.
Argentina’s argument that MASA cannot claim for the interest in Sierra Chata that it inherited from MEDA fails to reference any legal authority for support. MASA is MEDA’s successor in interest under Argentine law, and as such, may assume MEDA’s standing in this arbitration. The BIT expressly applies to claims for acquired investments, and ICSID tribunals have only precluded assignees from claiming when assignments were made to obtain ICSID jurisdiction where there was none, which is not the case here. That the transfer in question was made after the date of registering the original claim has no bearing on this conclusion, since it does not introduce a new investment, a new claim, or a new claimant to this proceeding. Moreover, even if the MEDA-MASA Transfer were not valid - as Argentina alleges—the issues surrounding MASA’s standing would be moot since MEDA would still own its direct interest in Sierra Chata and could continue to claim for that interest through the present date.
252.
Through the 2004 bulk transfer, MASA became the owner of the Sierra Chata Assets by way of "universal succession." Under Argentine law, a transfer of a going concern involves a "universal succession" as opposed to a simple assignment of assets or transfer uti singuli. The existence of "universal succession" is not affected by a partial exclusion from the transfer of certain assets or liabilities.
253.
It follows that, in addition to its standing to claim for all damages sustained in relation to its investment in Aguaragüe, MASA may claim for damages to the portion of the investment received from MEDA accruing after 31 December 2004 (i.e., the effective date of the MEDA-MASA Transfer).
254.
While the existence and validity of the MEDA-MASA Transfer is governed by domestic law, its consequences for the current proceeding constitute a matter of international law. Article I (3) of the BIT is explicitly flexible with how investors choose to structure their investments, stating that: "Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment." Likewise, the ICSID Convention contains no provision that would prohibit successors in interest, such as MASA, from continuing a claim in place of their predecessor. ICSID tribunals have consistently held that transfers and assignments of investments from one BIT-protected investor to another, such as that in the MEDA-MASA Transfer, are valid and do not raise issues of jurisdiction.
255.
The corporate restructuring in this case did not involve any transfers between third parties, but rather a restructuring of assets solely between two wholly-owned ExxonMobil subsidiaries, MEDA and MASA, both of which have been claimants since the commencement of the arbitration. The Claimants introduced no new parties, investments, or claims to the proceeding as a consequence of the transfer.
256.
In this case, MEDA had standing to claim for damage to the Sierra Chata assets, and transferred that interest and standing through a universal succession to an affiliate, MASA, at a time when MASA was already a Claimant in the arbitration. MEDA and MASA are US nationals for the purposes of the BIT, and they made the Transfer as part of a corporate restructuring within a group of affiliated companies, not to create ICSID jurisdiction where none existed. Thus, the Transfer complies with the nationality requirements of the ICSID Convention, and ICSID jurisdiction should be upheld.
257.
Argentina’s argument that "MASA may not invoke an investment other than the investment alleged when it filed its claim" is, at best, procedural in nature and has no basis in the jurisdictional requirements of either the BIT or the ICSID Convention. Simply because ICSID jurisdiction is established at the date of registering the arbitration does not mandate that a successor in interest to an investment forming part of the original claim may not continue to claim in place of the original claimant, especially when the successor in interest is already a party to the arbitration.
258.
Because Argentina’s objection is a procedural (rather than jurisdictional) in nature, MASA could always bring the claim in another proceeding if the Tribunal were to not admit it in this proceeding. Such a result would create inefficiencies and risk an adjudicated outcome inconsistent with the Tribunal’s decision about the same measures and the same investment in this proceeding. Moreover, a decision to exclude the portion of the claim for damage to the Claimants’ interest in Sierra Chata after 31 December 2004 would be inconsistent with the goal of Article 46 of the ICSID Convention and Rule 40 of the ICSID Arbitration Rules to finally resolve the dispute in one proceeding.
259.
In summary, MASA is MEDA’s successor in interest and may continue in MEDA’s place in this proceeding to claim for the investment in Sierra Chata. This conclusion is supported by the fact that the MEDA-MASA Transfer has no bearing on the Claimants’ standing under the BIT or the ICSID Convention. The dispute involves the same claimants, the same investments and the same claims; thus, the inter-affiliate restructuring between MEDA and MASA in no way prejudices Argentina. In consideration of these facts and the analysis above, the Claimants ask that the Tribunal reject Argentina’s objections on this point and affirm MASA’s standing to claim as MEDA’s successor in interest.
260.
Article I (3) of the BIT provides that "[a]ny alteration of the form in which assets are invested or reinvested shall not affect their character as investment." This provision reflects the BIT’s policy to protect investment while maintaining the investor’s autonomy to structure its investment.
261.
The restructuring of MEDA and MASA’s investments created no jurisdiction here because ICSID jurisdiction over their claims already existed. Until the MEDA-MASA Transfer, MEDA undoubtedly fell within the personal jurisdiction of the BIT and the ICSID Convention as a United States company with an investment in Argentina. That MEDA now holds its investment indirectly does not change this fact. To deprive MEDA of ICSID’s jurisdiction because of the restructuring of its interest in Sierra Chata would contradict the clear policy goal in Article I (3) of the BIT to allow investors to restructure their investment through the form they see fit.
262.
With respect to MEDA’s continued claim for damages to its investment in Sierra Chata as shareholder of MASA, The Claimants note that they do not seek doublerecovery. Rather, the Claimants simply wish to affirm MEDA’s continued standing to claim despite changing the form through which it holds its investment in Sierra Chata.
263.
Argentina’s attempt to deny the advantages of the BIT to a US shareholder in a local company is at odds with express provisions of the BIT. The inclusion of shareholders is confirmed by Article I (1) of the BIT, which defines "investment" as "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: a company or shares of stock or other interests in a company or interests in the assets thereof’ and "any right conferred by law or contract, and any licenses and permits pursuant to law."
264.
Through the BITs’ definition of "investments" as including companies and shares of stock, "the participation" in the locally incorporated company becomes the investment. Even if the local company is unable or unwilling to pursue the claim internationally, the foreign shareholder in the local company may pursue the claim in his own name. The shareholder may then pursue claims for adverse action by the host State against the local company that affects its value and profitability.
265.

Thus, contrary to Argentina’s assertions, MEDA is not pursuing the rights of MASA. MEDA’s claim is brought on its own behalf as a US investor with qualifying investments under the BIT. MEDA’s shareholding in MASA and its indirect ownership of investments owned by MASA, including the concessions, contracts, and permits, is a covered investment that provides MEDA with standing under the ICSID Convention and the BIT. Claims by shareholders are well recognised in ICSID case law, Shareholders like MEDA have a direct right of action for such "derivative" claims.

b. The Tribunal's analysis

266.
Argentina argues that the Claimants have lost standing to claim for the portion of MEDA’s investment that MASA has obtained as MEDA’s successor in interest through the MEDA-MASA transfer which became effective on 31 December 2004.
267.
Pursuant to Article 25(2) of the ICSID Convention jurisdiction is established on the dates of consent and registration of the dispute. As a result, subsequent events do not affect jurisdiction. Thus a disposal or transfer of assets that form the basis of an investment claim, subsequent to the institution of the proceedings, such as the transfer from MEDA to MASA, does not affect the standing of the original claimant. Thus, MEDA may claim for damages caused by Argentina's measures affecting its investments before the MEDA-MASA transfer became effective on 31 December 2004.
268.
The Tribunal agrees with the Claimants that the MEDA-MASA transfer merely altered the form in which the Claimants held their investments in Argentina through changes in asset ownership and shareholding of two wholly-owned subsidiaries of Exxon-Mobil Corporation.
269.
Article 1(3) of the BIT provides that "[a]ny alteration of the form in which assets are invested or reinvested shall not affect their character as investment." As the Claimants submit, no issue of jurisdiction under the ICSID Convention arises from a transfer between original claimants for reasons unconnected with the claim, even if the measures forming the basis of the claim accrue after the transfer. It follows that, although MASA, an original claimant in these proceedings, received its interest in Sierra Chata, an investment present since the commencement of these proceedings, through a bulk transfer in the form of universal succession, this does not preclude MASA from pursuing its claim with respect to those assets.
270.
MEDA-MASA transfer has no bearing on the Claimants' standing under the BIT or the ICSID Convention, although the transfer was made after the date of registering the Request for Arbitration. The dispute involves the same Claimants, the same investments and the same claims; thus the inter-affiliate restructuring between MEDA and MASA in no way prejudices Argentina.
271.
Thus, MASA may from 31 December 2004, which is the date on which the transfer pursuant to the transfer agreement became effective, onwards claim for possible damage or harm suffered after that date because of Argentina's measures affecting the investments it obtained from MEDA.
272.
On the other hand, the Tribunal finds that the transfer from MEDA to MASA had the effect that MEDA lost its standing to claim for possible damage or harm affecting the investment it transferred to MASA suffered after the transfer of assets from MEDA to MASA became effective on 31 December 2004. Being a shareholder of MASA does not give MEDA standing to pursue a claim concerning MASA’s rights, which do not specifically belong to MASA’s shareholders.
273.
For the reasons mentioned above, the Tribunal finds Argentina's objection concerning MEDA’s standing, in its capacity as shareholder of MASA, to claim for possible damage or harm suffered after the transfer of assets from MEDA to MASA became effective on 31 December 2004 justified. In all other respects, the Tribunal finds Argentina's sixth objection unfounded. The objection is accordingly accepted as far as it concerns MEDA’s standing in its capacity as shareholder of MASA but in all other respects dismissed.

8. Seventh objection to jurisdiction: - Absence of any Evidence that MASA should be treated as a US company

a. The Parties’ Positions

i. The Respondent

274.
Argentina contends that the Claimants have not proven that MASA should be treated as a US company for the purposes of Article 25(2) (b) of the ICSID Convention and Article VII (8) of the BIT. In the absence of such evidence, says Argentina, the Tribunal has no jurisdiction to entertain MASA's claim. The only evidence produced by the Claimants to try to prove the existence of control was a certificate issued by an employee of Exxon Mobile Corporation, which stated that from 1 December 2001 up to the date of issue of the certificate - 21 January 2009 - MASA had been and continued to be "an indirect wholly-owned subsidiary of Exxon Mobile Corporation." This is not sufficient to prove that Exxon Mobil controlled MASA.

ii. Claimants

275.
Claimants contend that since MASA has been incorporated in Argentina at all relevant dates for determining jurisdiction, including on the date that the parties consented to submit this dispute to ICSID arbitration, it is only necessary that: (i) the parties have agreed that MASA should be treated as a national of that other Contracting State for purposes of the ICSID Convention; and (ii) MASA is controlled by shareholders of a Contracting State to the ICSID Convention other than Argentina.
276.
Through Article VII (8) of the BIT, Argentina agreed to treat MASA as a US company. Argentina cannot credibly deny that MASA is an investment of Exxon Mobil Corporation, a company incorporated in New Jersey that indirectly holds 100% of MASA’s shares, particularly when the Chief of Cabinet himself, in a report to the House of Representatives, expressly recognised that "MASA is a corporation indirectly owned by Exxon Mobil Corporation." The Chief of Cabinet’s statement is particularly relevant because he cites information provided by the Procuración del Tesoro de la Nación, representing Argentina in this case, as the source of its statement.
277.
That Exxon Mobil Corporation has a 100% indirect shareholding interest in MASA fortifies the reasonableness of the parties’ agreement to treat MASA as a US company for purposes of the BIT and the ICSID Convention.

b. The Tribunal's analysis

278.
Article 25(2)(b) of the ICSID Convention states:

"National of another Contracting State" means:

(a) any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purpose of this Convention."

279.
MASA has been incorporated in Argentina at all relevant dates for determining jurisdiction. Therefore, it is only necessary that: (i) the parties have agreed that MASA should be treated as a national of the other Contracting State for purposes of the ICSID Convention; (ii) MASA is controlled by shareholders of a Contracting State other than Argentina.
280.
Article VII (8) of the BIT states:

"For purposes of an arbitration held under paragraph 3 of this Article, any company legally constituted under the applicable laws and regulations of a Party or a political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall be treated as a national or company of such other Party in accordance with Article 25(2) (b) of the ICSID Convention."

281.
Thus, in case MASA is an investment of nationals or companies of the United States of America and is under "foreign control", Argentina has agreed to treat MASA as a US company.
282.
The Chief of Cabinet has in a report the House of Representatives expressly recognised that "MASA is a corporation indirectly owned by Exxon Mobil Corporation."85 Therefore, and in the light of the full corporate charts with references to supporting stock ledger submitted by Claimants,86 it has been established that Exxon Mobil Corporation, a company incorporated in New Jersey, indirectly holds 100 % of MASA’s shares.
283.
Having regard to this ownership the Tribunal finds it established that MASA also is under foreign control and that Argentina and the United States have agreed in the BIT that MASA shall be treated as a national of the United States for the purposes of the ICSID Convention. Argentina's objection is accordingly dismissed.

C. Conclusions

284.
The objections to the jurisdiction of the ICSID, the competence of the Arbitral Tribunal and of the admissibility of the claims raised by the Argentine Republic must be rejected. However, MEDA lacks locus standi in order to file a claim against the Argentine Republic: a) for damages allegedly attributable to the Respondent stemming from measures applied in the area of Aguaragüe; b) for damages occurring as of 31 December 2004 allegedly attributable to the Respondent, including damages resulting from the application of measures concerning export restrictions, re-routing, Export Withholdings and royalties in the area of Chihuidos all of which were adopted after the 31 December 2004, i.e. the date when the transfer from MEDA to MASA became effective.
285.
Thus MEDA is entitled to claim for damage which occurred before 31 December 2004 allegedly attributable to the Respondent stemming from the measures applied in the Chihuidos area. MASA, for its part is entitled to claim for damages allegedly attributable to the Respondent stemming from measures applied in the area of Aguaragüe as well as for damages allegedly attributable to Respondent, which occurred as of 31 December 2004, stemming from the measures applied in the Chihuidos area, including damages resulting from the application of export restrictions, re-routing, Export Withholdings and royalties referred to in the ancillary claims.

VII. APPLICABLE LAW

286.
Before proceeding to examine the facts and the parties’ allegations, the Tribunal will make the following preliminary observations concerning the law applicable to the merits of the dispute.
287.
Article 42 (1) of the ICSID Convention provides:

"1. 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".

A. The Parties’ Positions

288.
The Claimant argues that Article 42 of the ICSID Convention, in its first sentence, directs the Tribunal to look first to the rules of law agreed by the parties, and in the absence of any such agreement, the Tribunal should look to (1) the law of the Contracting State, and (2) such rules of international law as may be applicable.
289.
International law applies in this case because the BIT (which is part of Argentine law) is itself the governing law as the lex specialis between the parties, and it expressly requires Argentina to comply with international law. In addition, international law applies under the second sentence of Article 42(1) regardless of the application of Argentine law because that sentence makes international law applicable in every ICSID arbitration in which the parties have not agreed on a choice of law to the contrary. Thus, the decision to apply international law is not optional; the Tribunal has a mandatory duty to apply applicable international law, regardless of the role of domestic law. The Claimant argues that Article 42 of the ICSID Convention, in its first sentence, directs the Tribunal to look first to the rules of law agreed by the parties, and in the absence of any such agreement, the Tribunal should look to (1) the law of the Contracting State, and (2) such rules of international law as may be applicable.
290.
In any event, Argentina has incorporated international law into its domestic law and treaties prevail over domestic law. Thus international law applies in this case. The BIT expressly requires Argentina to comply with international law, and the BIT and international law have been incorporated by Argentina in its domestic law.
291.
According to the Claimant, the BIT requires "the Argentine Republic to afford U.S. investors like MEDA and MASA treatment no less favourable than that required by international law, both with respect to investment generally and in particular with respect to expropriations or measures tantamount to expropriation of an investment."
292.
The Claimant quote, among others, Professor Weil who says:

"However complex and multifaceted, these attempts [to delineate the respective roles of domestic and international law] are actually futile, for no matter how domestic law and international law are combined, under the second sentence of Article 42(1), international law always gains the upper hand and ultimately prevails. It prevails indirectly through the application of domestic law where the latter is deemed consistent with international law or incorporates it. It prevails directly where domestic law is deemed deficient or contrary to international law. Thus, under the second sentence of Article 42(1), international law has the last word in all circumstances: "international law is fully applicable and to classify its role as 'only’ 'supplemental and corrective’ seems a distinction without a difference."87

293.
The Claimants also rely on the statement of the ICSID Tribunal in Santa Elena. In that case the Tribunal concluded that Costa Rican law was "generally consistent with the accepted principles of public international law on the same subject." The Tribunal noted, however, that

"[t]o the extent that there may be any inconsistency between the two bodies of law, the rules of public international law must prevail. Were this not so in relation to takings of property, the protection of international law would be denied to the foreign investor and the purpose of the ICSID Convention would, in this respect, be frustrated."88

294.
Moreover, the Claimants rely, inter alia, on the Annulment Committee in Vivendi II on the law applicable to the determination of whether a breach of the BIT has occurred. It held

"[T]he 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."89

295.
In support of their contention that that international law also applies under the second sentence of Article 42(1) of the ICSID Convention, the Claimants rely here again on the authority of Professor Weil, who with regard to tribunal's choice of law analysis under the second sentence of Article 42(1), holds: "These attempts [to delineate the respective roles of domestic and international law] are actually futile, for no matter how domestic law and international law are combined, under the second sentence of Article 42(1) international law always gains the upper hand and ultimately prevails."90
296.
The Claimants conclude that although the Tribunal is required to apply both the law of the Contracting State and applicable international law under the second sentence of Article 42(1), international law inevitably prevails when domestic and international law conflict. Any other interpretation would allow governments to enact and interpret laws in order to evade their international obligations, thereby frustrating the purpose of the ICSID Convention and the protections of the BIT.
297.
The Respondent draws a different conclusion from the fact that the parties have not agreed on the applicable law. The Respondent submits that the second sentence of Article 42(1) of the ICSID Convention must be applied. Hence, in accordance with Article 42(1) of the ICSID Convention, the law governing the present dispute consists of the provisions of the applicable BIT and other applicable rules of international law, as well as the Rules of Argentine law.
298.
Moreover, the Respondent submits that in the instant dispute, the definition of rights allegedly acquired by the Claimants is defined by Argentine law. The existence of such rights, as well as their scope, manner of acquisition and conditions for their transfer are determined by Argentine law. Neither the BIT nor general international law contains any definition of these concepts. The Respondent quotes Judge Rosalyn Higgins, who states as follows:

"So far as the concept of property itself is concerned, it is as if we international lawyers say: property has been defined for us by municipal legal systems; and in any event, we "know" property when we see it. But how can we know if an individual has lost property rights unless we really understand what property "is?"91

299.
Therefore, in order to know whether the Argentine Republic is internationally responsible under the BIT, the Respondent asserts it must be determined, in the first place, which the rights allegedly acquired by Claimants under Argentine law are and how those alleged rights evolved under Argentine law.
300.
The Respondent refers to the case EnCana Corporation v. Ecuador, in which, the Respondent contends, this has been upheld in the following terms: "[F]or there to have been an expropriation of an investment or return (in a situation involving legal rights or claims as distinct from the seizure of physical assets) the rights affected must exist under the law which creates them."92
301.
Moreover, the Respondent refers to Sacerdoti, who states "[f]oreign investments are subject in the first place to general legislation and to any specific applicable law and regulation of the host state."93
302.
Therefore, the Respondent contends, Argentine law is one of the sources of law that must be applied in order to determine whether the Treaty standards for the protection of investments have been complied within in this particular case.
303.
In conclusion, the Respondent asserts that Argentine law determines the existence and scope of the rights allegedly acquired by the Claimants and is part of the applicable law to be used for determining whether the Treaty provisions have been complied with.
304.
Finally, Argentina contends that the human rights obligations of the State must be borne in mind in interpreting and delimiting the scope of the applicable BIT provisions, given that the emergency measures challenged by the Claimants must be analyzed in the light of all the relevant rules, including the paramount obligation of the State to guarantee fundamental human rights.
305.
In their Reply, the Claimants contend that Argentine law is irrelevant to the issue of Argentina's international responsibility; it is only relevant as a fact to add context to Argentine Government’s measures and conduct at issue, which the Tribunal must analyze through the lens of the BIT and international law.
306.
Moreover, the Claimants contend that Argentina's interpretation of EnCana is confused and inaccurate. In that case, the claimant argued that Ecuador wrongfully denied rights to refunds owed to EnCana’s subsidiaries under Ecuadorian law. The Tribunal thus looked at Ecuadorian law to determine the content of the commitment to VAT refunds made by Ecuador. But Ecuadorian law was not employed to determine the standard of international responsibility, as Argentina implies. Nor does the EnCana decision imply that the Tribunal would not have looked to sources other than Ecuadorian law for the VAT refund obligation at issue (e.g., assurances from State officials, legal or contractual commitments, the BIT, etc.) had the claimant alleged such additional source.
307.
In addition, the Claimants rely on the statements by the Tribunal in the CME case and the Tecmed case. In the CME case the Tribunal stated: "The State may not invoke its own legislation to detract from [its BIT] obligationfs]."94 In the Tecmed case the Tribunal held: "That the actions of the Respondent are legitimate or lawful from the standpoint of the Respondent's domestic laws does not mean that they conform to the Agreement or to international law."95
308.
In its reply, the Claimants finally contends that in maintaining that its measures were necessary to preserve fundamental human rights in the time of the crisis, Argentina establishes no direct link between the measures at issue and its human rights obligations. In support of that Claimants refer to the Siemens case in which the Tribunal remarked:

"[T]he Tribunal notes the reference made by Argentina to international human rights law ranking at the level of the Constitution after the 1994 constitutional reform and implying that property rights claimed in this arbitration, if upheld, would constitute a breach of international human rights law. This argument has not been developed by Argentina. The Tribunal considers that, without the benefit of further elaboration and substantiation by the parties, it is not an argument that, prima facie, bears any relationship to the merits of this case."96

309.
Furthermore, the Claimants contend that similarly, the tribunals in Azurix and CMS held that Argentina failed to establish the incompatibility of its human rights and investment treaty obligations within the precise context of those cases.97
310.
In its Rejoinder, Argentina reaffirms its considerations in the Counter-Memorial that, the parties have not expressly agreed on the applicable law in the BIT and, therefore, Article 42(1) of the ICSID Convention, second sentence, establishes the applicable law, which includes Argentine law, the applicable BIT provisions and other international law, for instance human rights provisions. Thus the Tribunal must apply the BIT, Argentine law and other relevant international laws in a harmonious manner so that there are no contradictions between them since the second sentence of Article 42(1) of the ICSID Convention sets forth the application of all those sources of law, without giving precedence. Argentina quotes, among others, Sacerdoti who explains:

"[t]his construction of the relationship between domestic law and BIT’s obligations indicated that the freedom of the host state to enact or change its law and regulations in the furtherance of general or specific policies (e.g. in the respect of in the environment labour and consumer protection, technological research, industrial development) is basically unaffected by BIT’s".98

311.
Moreover, Argentina relies in support of its contention that domestic law is frequently relevant to determine whether there was a breach of the international instrument, inter alia, on the fact that the Ad Hoc Committee in the Decision on Annulment in the Vivendi case held that "at most, it might be relevant—as municipal law will often be relevant—in assessing whether there has been a breach of the treaty."99
312.
In its Rejoinder, Argentina emphasizes that it requests the Tribunal to take into consideration the international law of human rights when analyzing whether the Argentine Republic breached any provision under the Treaty. For instance, the fact that a measure was adopted to protect certain fundamental human rights Argentina was (and is) subject to by international laws of the highest level becomes relevant to determine if the measure that ruled certain rights of foreign investors was fair and equitable. Argentina holds that there is no conflict whatsoever between the rules on investment and on human rights and reasserts that the measures that the Claimants challenge were legitimately adopted and necessary for the protection of fundamental human rights.

B. The Tribunal’s Analysis

313.
The Claimants consider that the first sentence of Article 42 (1) of the ICSID Convention applies in this case since the BIT is itself the governing law as the lex specialis between the parties, and it expressly requires Argentina to comply with international law.
314.
There is no express agreement between the Claimants and Argentina on the applicable law. Neither does the BIT contain any express clause on applicable law. Thus, the Tribunal agrees with Argentina that the second sentence of Article 42 (1) of the ICSID Convention applies in the instant case.
315.
The Tribunal notes that the parties agree that the BIT is the point of reference for judging the merits of MEDA’s and MASA's claim. The Tribunal further notes that, according to the Argentine Constitution, the Constitution and treaties entered into with other States have primacy over domestic laws.100
316.
Article 42(1) of the ICSID Convention has been the subject of controversy on the respective roles of municipal law and international law. It is clear from the second sentence of Article 42(1) that both legal orders have a role to play, which role will depend on the nature of the dispute and may vary depending on which element of the dispute is considered.
317.
MEDA’s and MASA's claim has been advanced under the BIT and, as stated by the Annulment Committee in Vivendi101 and later by the Azurix Tribunal102, the Tribunal’s inquiry is governed by the ICSID Convention, by the BIT and by applicable international law. While the Tribunal’s inquiry will be guided by this statement, this does not mean that the law of Argentina should be disregarded. On the contrary, the law of Argentina should be helpful in the carrying out of the Tribunal’s inquiry into the alleged breaches of the concessions and permits to which Argentina’s law applies, but it is only an element of the inquiry because of the treaty nature of the claims under consideration.

VIII. APPLICABLE REGULATORY FRAMEWORK

318.
Argentina deregulated in 1994 natural gas wellhead prices and marketing by producers as from 1 January 1994 by Decree 2731/93. The disagreement between the parties concerns above all the significance of the Hydrocarbons Law (no. 17,319) of 1967.

A. The Parties’ Positions

1. The Claimants' position

319.
The Claimants assert that "Article 6 of Hydrocarbons Law provides the Government with the power to regulate only the prices of liquid hydrocarbons, not natural gas." They contend that Article 6 of the Hydrocarbons Law has not governed gas exports since the Argentine Government modified the regime governing gas exports through the Gas Law and its implementing regulations, the Chile-Argentina Energy Treaty, the Deregulation Decrees, and other government measures.
320.
Even if quod non the Hydrocarbons Law did govern the regulation of gas prices, the Deregulation Decrees enjoy legislative status, and Articles 14 and 15 of Decree 1055/89 would prevail over the Hydrocarbons Law on the specific issues of gas prices and gas marketing. The legislative status of the Deregulation Decrees under Argentine law is widely accepted and has been upheld by Supreme Court decisions, however, Argentina fails to identify any ministerial resolutions that have purportedly repealed those decrees:
321.
Articles 14 and 15 of Decree 1055/89 provide:

"Article 14. — FREE DISPOSITION OF HYDROCARBONS.

Hydrocarbons obtained as a result of the concessions governed by the Argentine Mining Code may be freely disposed of once 180 days have elapsed from the effective date hereof.

Article 15. — The free disposition of hydrocarbons referred to in Sections 5(d), 13 and 14 hereof shall be governed by these rules:

a) Hydrocarbons may be sold without restrictions in the domestic and foreign market pursuant to the legal framework in force.

b) Companies shall have access to treatment, movement, storage and dispatch systems or means at rates consistent with international values.

c) The payment of royalties for freely disposable hydrocarbons must be made by the companies in accordance with the regulations fixed by the SECRETARIAT OF ENERGY."

322.
Decree 2446/92103 which approved the Aguaragüe Contract, provides in Article 4 that the parties shall own and be free to dispose of the hydrocarbons extracted from the Aguaragüe area (Northwestern Basin), pro rata their respective shares in the Agreement as approved in Article 1, in accordance with provisions set forth in Article 6 of Law No. 17,319, Articles 13 and 15 of Decree No. 1055, dated October 10, 1989, Articles 5 and 6 of Decree No. 1589, dated December 27, 1989, and Article 5 of Decree No. 305, dated February 12, 1992.
323.
The Sierra Chata Decree 1969/93104 Article 3, provides that the Permit holder shall own and be entitled to freely dispose of the hydrocarbons produced in the Area of the Exploration Permit, in accordance with Article 6 of Law No. 17,319, Article 15 of Decree No. 1055, dated October 10, 1989, Article 4 of Decree No. 1212, dated November 8, 1989, Articles 5 and 6 of Decree No. 1589, dated December 27, 1989, and Article 5 of Decree No. 2411, dated November 12, 1991, whose terms in force as of the signing date of the Memorandum of Understanding approved in Article 1 hereof shall be incorporated to the Exploration Permit during its effective term.
324.
Thus, Argentina assumed the commitment to give the Claimants a right to freely dispose of their natural gas production in the domestic and external markets not only through general legislation but through specific promises made in the Sierra Chata Concession and the Aguaragüe Contract.
325.
The existence of this right was acknowledged by the current Secretary of Energy Cameron in both internal memoranda105 and during his testimony at the hearing.106 As stated by Decree 867/2002, the "essence of the right to freely dispose of production" is the "right of producers to dispose of the product at freely agreed prices." The minimum price guaranteed by Article 6 of Decree 1589/89140 was also specifically incorporated into the Claimants’ Hydrocarbon Concessions and Contracts.

2. Argentina's position

326.
Argentina contends that among the rules specifically governing the exploration, exploitation and marketing of hydrocarbons in the Argentine Republic, the Hydrocarbons Law is the highest applicable law. Nonetheless, there are certain laws enacted by the Congress which rank pari passu in hierarchy with the Hydrocarbons Law and govern specific aspects of hydrocarbons, such as hydrocarbon exports.
327.
With regard to natural gas, the Hydrocarbons Law contains the general principles and the legal system applicable to its exploration, exploitation and industrialization, whereas the Gas Law provides for the transportation and marketing thereof.
328.
Agreeing domestic prices to cover operation costs and enable the obtention of reasonable revenues is a Policy of State perfectly consistent with the power of the Executive Branch to regulate domestic prices set forth by the Hydrocarbons Law article 6.
329.
Article 6 of the Hydrocarbons law provides:

"Permit holders and concessionaires shall be the owners of any hydrocarbons extracted by them and, as a result, they may transport, sell and industrialize them, as well as sell their by-products, in accordance with the regulations enacted by the Executive Branch, based on reasonable technical and economic considerations which shall bear in mind the best interest of the domestic market and attempt to promote the exploration and exploitation of hydrocarbons.

During periods in which the national production of liquid hydrocarbons is not enough to meet domestic needs, the use in the country of all available hydrocarbons of national origin shall be mandatory, except in cases where it is not convenient due to sufficient technical reasons. As a result, the new refineries or extensions shall adapt to the rational use of national oils.

If during such a period the Executive Branch sets the prices for selling crude oil in the domestic market, such prices shall be equal to those set for the relevant state-owned company, but not lower than the price levels for imported oils of similar characteristics. Where the prices of imported oils significantly increase due to special circumstances, they shall not be taken into consideration when fixing the sales price in the domestic market and, in that case, they may beset on the basis of the actual exploitation costs of the state-owned company, such amortizations may be technically appropriate, and a reasonable interest rate on the updated and depreciated investments made by such state-owned company. If the executive sets the prices for by-products, they shall be consistent with the oil prices calculated on the basis of the above criteria.

The Executive Branch shall allow the export of hydrocarbons or byproducts which are not required for properly satisfying domestic needs, provided that such exports are carried out at reasonable commercial prices. In such case, it may establish the criteria that shall govern transactions in the domestic market, in order to allow all of the country’s producers to participate in it in a reasonable and equitable manner.

The natural gas produced may be used, first, to satisfy the needs characteristic of the exploitation of the fields from which it is extracted and of other fields in the area, whether or not they belong to the concessionaire and in pursuance of the provisions of section 31. Any state owned company providing public gas distribution services shall be given preference in the acquisition, within acceptable terms, of the amounts remaining after the abovementioned use at agreed-upon prices which may ensure a fair return on the relevant investment, bearing in mind the specific characteristics and conditions of the field.

With the approval of the enforcement authority, the concessionaire may decide on the destination and terms of use of the gas not employed in the manner indicated above.

The sale and distribution of gaseous hydrocarbons shall be subject to the regulations enacted by the Argentine Executive Branch."

330.
Argentina contends that the Hydrocarbons Law passed in 1967 remains in full force and effect also after the GOA modified the regime governing gas exports through the Gas Law and its implementing regulations, the Chile-Argentine Treaty, the Deregulation Decrees, and other government measures. It is the highest-ranking statute regulating the hydrocarbons exploration and exploitation in Argentina. The Chihuidos Permit expressly establishes the right to freely dispose of hydrocarbons in accordance with Section 6 of the Hydrocarbons Law, the Deregulation Decrees and the Conversion Decree. It should be noted that Section 6 of the Hydrocarbons Law has a higher rank than the Deregulation Decrees and the Conversion Decree, and grants broad powers to the Argentine Executive Branch to impose restrictions, quotas, domestic prices, etc. The Gas Law only governs procedural aspects of exports and imports of natural gas and, as mentioned by the Secretary of Energy Cameron, "the ruling principles were still those established by Section 6 of Law 17,319, which remained fully effective."107
331.
Section 1 of the Gas Law sets forth expressly that "[it] shall govern the transportation and distribution of natural gas [only]" whereas "[hydrocarbons] production, collection, and treatment shall [continue] be[ing] regulated by Argentine Law No. 17,319."
332.
Furthermore, when defining the persons actively engaged in the natural gas industry, Section 9 of the Gas Law established expressly that it is only "natural gas transporters, distributors, brokers, storage operators or consumers" who are fully bound by the rights and obligations deriving from natural gas. Instead, hydrocarbons producers (such as MEDA and MASA), who are also considered "persons" engaged in the natural gas industry, carry out a general interest activity and are to abide by the Hydrocarbons Law.
333.
In other words, the fact that the scope of Law No. 24,076 is narrowed down to the transportation and distribution of natural gas is unequivocal. Consequently, the activities carried out by MEDA any MASA continue being governed by the Hydrocarbons Law as stated by their respective hydrocarbon concessions.
334.
Moreover, it is incorrect to maintain that paragraph 2 of Section 6 of the Hydrocarbons Law does not apply to gaseous hydrocarbons, for said Section applied to both liquid and gaseous hydrocarbons.
335.
Proof of the foregoing is that paragraph 1 of Section 6 sets forth:

"Permit holders and concessionaires shall be the owners of any hydrocarbons extracted by them and, as a result, they may transport, sell and industrialize them, as well as sell their by-products, in accordance with the regulations enacted by the Executive Branch, based on reasonable technical and economic considerations which shall bear in mind the best interest of the domestic market and attempt to promote the exploration and exploitation of hydrocarbons."

B. The Tribunal’s Analysis

336.
Article 3 of Decree 1969/93108 and Article 4 of Decree 2446/92109 make the free disposal of hydrocarbons subject to Article 6 of the Hydrocarbons Law No. 17,319110. Pursuant to Article 6 of the Hydrocarbons Law the holders of permits, concessionaires, and other holders of exploitation rights may transport, commercialize and industrialize the hydrocarbons obtained and market its by-products, subject to such regulatory provisions issued by the Executive Power on reasonable technical and economic bases, for the benefit of the domestic market, and stimulating the exploration and exploitation of hydrocarbons. The reference to the Hydrocarbons Law in the Claimants’ Hydrocarbon concessions and contracts is due to the fact, that the Hydrocarbons Law governs specifically the rights and obligations related to exploration and production. This does not make the Hydrocarbons Law applicable to gas marketing and gas export.
337.
On these grounds, the Tribunal finds that the reference to the Hydrocarbons Law in the Claimants' concessions does not exclude the application of the Gas Law since the mining titles, i.e. permits and concessions are in any case subject to Argentinean law and the Gas Law is part of the laws of Argentina.
338.
The question is thus to which extent the Gas Law takes precedence over the Hydrocarbons Law. To reply to this question an analysis has to be made of the scope of application of the Gas Law.
339.
Article 1 (1) of the Gas Law provides:

"This law governs the transportation and distribution of natural gas which constitute a national public service, the production, gathering and treatment thereof being regulated by law 17,319."111

340.
Thus, according to this provision, the Gas Law governs the transportation and the distribution of natural gas, while the production, gathering and treatment thereof are regulated by Law 17,319 (the Hydrocarbons Law). However, Article 1 of the Gas law does not say which of those two laws regulates marketing of natural gas.
341.
Article 96 of the Gas Law provides:

"In the event of a conflict with this Law and other Laws, this Law shall prevail"

342.
Thus in the event of any conflict between the Gas Law and other laws, the Gas Law prevails. Consequently, the Gas Law prevails in case of conflict with the Hydrocarbons Law.
343.
A number of provisions of the Gas Law and its implementing regulations suggest that to the extent to which such provisions apply the Gas Law regulates also the marketing of natural gas.
344.
Thus Article 13 of the Gas Law provides that:

"Without prejudice to the rights of distributors arising from their entitlements, any consumer shall be entitled to purchase natural gas directly from producers or marketers, freely arranging with them the terms and conditions of the transaction."

345.
Article 38 (c) of the Gas Law provides for ENARGAS power to interfere with gas prices only to ensure competitive conditions.
346.
Article 83 of the Gas Law provides as follows:

"A period of one year as from the effective date of this law is hereby set, which may be extended by a decree of the Executive Power for one extra year, during which the diversification of the supply of gas shall be defined as the goal of the energy policy. The National Executive Power may reduce the above period if the goal is achieved before such time.

During such period, the Minister of Economy and Public Works and Services shall fix, for the domestic market, the maximum prices of gas at the point of entrance to the transportation system to be collected by the producers.

At the expiration of such period, the prices of gas at the point of entrance to the transportation system shall be deregulated and transactions for the demand and supply of gas shall be free within the industry's guidelines and pursuant to the Regulatory Framework."

347.
Decree 2731/1993, implementing Article 83 of the Gas Law, provides:

"From January 1, 1994, be the price of natural gas deregulated. All gas supply and demand shall be freely agreed upon form such date, pursuant to this Decree and the supplementary rules issued by the ENERGY SECRETARIAT."

348.
The expert Dr. Martelli said at the oral examination before the Tribunal that, "when the Gas Law was finally approved Hydrocarbons Law was limited to the mining aspects in Exploration and Production by means of Exploration permits and exploitation concessions— Hydrocarbons Law deals with mining aspects of production of gas and petroleum, and the Gas Law deals... two aspects of gas, marketing and gas exports."112 The same opinion was also expressed by former Secretary of Energy Mr. Bastos.113 Argentina’s expert witnesses did not submit anything that would rebut this evidence.
349.
On these grounds the Tribunal concludes that the Gas Law, and not the Hydrocarbon Law, also regulates the marketing and the export of natural gas
350.
According to the Claimants, the Deregulation Decrees enjoy legislative status and prevail over the Hydrocarbons Law on the specific issues of gas prices and gas marketing, whereas according to Argentina the Hydrocarbons Law passed in 1967 is the highest-ranking statute regulating the hydrocarbons exploration and exploitation in Argentina, and that it therefore remains in full force and effect also after the GOA modified the regime governing gas exports through the Gas Law and its implementing regulations, the Chile-Argentine Treaty, the Deregulation Decrees, and other government measures.
351.
The Decree 2446/92, which approved the Aguaragüe Contract, and Decree 1969/93 concerning the Sierra Chata Permit, expressly establish the right to freely dispose of hydrocarbons in accordance with Section 6 of the Hydrocarbons Law and the Deregulation Decrees. Decree 2446/92 refers in addition to the Conversion Decree.
352.
According to the Legal Opinion of Dr. Alberto Bianchi dated 13 February 2009. Regulations issued by the Executive Branch are called "decrees"114 and decrees issued to fill gaps in the general text of a law may be either "delegated" or executive decrees."115 Those two types of decrees have the same purpose to fill the gaps in the general contents of law.116 According to the same legal opinion Argentine law acknowledges that the Public Administration is vested with the power to complete the general text of a law, which may be achieved through two types of decrees, although no clear and specific distinction may be drawn between them.117 Thus, Argentine law allows for regulations to complete and become an integral part of laws and, if valid, the deregulated regulation becomes an integral part of the law, thus acquiring the same hierarchy and binding force as law. In other words, it becomes an integral part of the law as if it were law itself.
353.
The Tribunal finds that the Executive Branch (the "Argentine President") regulated the Hydrocarbons Law and Law 23,696 (the "State Reform Law"),118 which provided for the unbundling and eventual privatisation of public assets, through the Deregulation Decrees. Article 1 of Decree No. 1055/89 expressly states so and specifies the articles of the Laws above that are regulated; Decree No. 1212/89 mentions Law No. 23,696 and Decree No. 1055/89 in its recitals; and Decree No. 1589/89, in turn, refers to the Hydrocarbons Law and the two Decrees above. Decree No. 2411/91 not only refers to Laws Nos. 17,319 and 23,696 in its recitals, but also explains in detail the purpose of regulating and implementing the policies set out in Law No. 23,696.
354.
The Hydrocarbons Law provides for a wide range of delegations to the Executive Branch. Article 2 provides that hydrocarbon activities shall be conducted "in accordance with the provisions hereof and such regulations as may be issued by the Executive Branch." Article 3 provides that the Executive Branch shall determine the national hydrocarbon policy. Articles 4 and 6 authorise the Executive Branch to grant permits and concessions and to regulate the activity of permit holders and concessionaires. Article 7 provides that the Executive Branch shall establish the rules applicable to the import of hydrocarbons and by-products, ensuring the attainment of the goal set forth herein. As stated by Dr. Bianchi the Hydrocarbons Law "is based on the power delegated to the Executive Branch to regulate the application of the law."119
355.
The privatization of state-owned companies and their business implemented in Argentina during the 1990s was structured on the basis of the State Reform Law. To this end, extensive powers were delegated to the Executive Branch.120 As to hydrocarbons, the State Reform Law authorised the Executive Branch to convert the state-owned hydrocarbon company Yacimientos Petrolíferos Fiscales ("Y.P.F.") and to award its areas in concessions or joint ventures, or execute lease contracts for the exploration and exploitation of certain areas.
356.
The Tribunal finds that in exercising its power based on the power delegated to the Executive Branch to regulate the application of the Hydrocarbons Law, the Executive Power regulated the Hydrocarbons Law through the Decrees referred to above within the general framework of the principles of privatisation and deregulation of hydrocarbon activities under the State Reform Law. As stated by Dr. Bianchi, within the context of this policy, and to support and ensure the feasibility of the project, the Executive Branch issued the Deregulation Decrees, which, among other provisions, established the right to freely dispose of hydrocarbons, the right to freely trade hydrocarbons in the domestic and international markets, the prohibition of withholding taxes on present or future exports or discriminatory taxes, and the right to export hydrocarbons freely.121
357.
Moreover, the Tribunal concludes that the Decrees conform to the legislative policy established in the Hydrocarbons Law and the State Reform Law. As delegated law, the Decrees referred to above are an integral part of the Hydrocarbons Law and the State Reform Law and have the same legal status as those laws. They thus prevail over the Hydrocarbons Law of 1967 on the specific issues of gas prices and gas marketing. As can be seen from Dr. Bianchi’s report, the Supreme Court has held that such regulatory provisions have the same force and effects as laws.122
358.
Finally, as shown in the Bianchi Report, the Deregulation Decrees constitute delegated legislation contemplated in Temporary Provision Eight of the Argentine Constitution. Those Decrees were subsequently ratified by Laws No. 25,148, 25,645, 25,918, and 26,135. Laws No. 25,148, 25,645, 25,918, and 26,135 also ratified the legislative status of the Deregulation Decrees.123

IX. THE MEASURES CHALLENGED BY CLAIMANTS

359.
Before the Tribunal considers the meaning of each of the standards allegedly breached by the Argentina, and because this discussion is closely related to the conflicting views of the parties on the facts of the dispute and their implications, the Tribunal will now consider at length the facts and the measures challenged by the Claimants and then each of the standards of treatment of the BIT supposedly breached by the Respondent. The Tribunal will follow the order in which the facts have been presented in the Claimants Memorial on the Merits taking into account the witness statements, the documentation submitted, expert opinions and the written and oral arguments made by the parties.

A. Pesification and other price interference

1. Introduction

a. The Claimants' position

360.
The Claimants contend that Argentina interfered heavily with the Claimants’ contracts and prices in violation of the Legal Framework and their vested rights, mainly by:

(a) Pesifying domestic gas supply contracts (i.e., the mandatory conversion to Pesos of the dollar denominated gas sales prices at an artificial rate of US$1 to AR$1);

(b) Preventing gas distribution companies and power generators from passing through to their gas distribution tariffs and energy variable production costs any increase in the wellhead price of natural gas purchased from producers;

(c) Freezing the price of natural gas for all categories of users until 2004, and in the case of residential users and small commercial users, until December 2008; and

(d) Preventing gas producers from freely agreeing on the price of natural gas with their customers, as guaranteed by the Gas Law and the Claimants’ Hydrocarbon Concessions and Contracts, and imposing low regulated prices.

b. Argentina’s position

361.
Argentina asserts that the Claimants, allegation that the pesification of contracts provided for by the Emergency Law and Decree No. 214/02 violated their right to freely agree on hydrocarbon prices in accordance with the statutory framework and hydrocarbon concessions and contracts is flawed.
362.
The crisis of late 2001 and 2002 was the worst economic, social and institutional crisis that ever hit the country and affected all its inhabitants and sectors. Consequently, as pointed out by Mr. Cameron, Secretary of Energy, it "also affected the energy activity in general, as well as the hydrocarbon activity in particular."124 To endeavour to isolate from the crisis, as the Claimants attempt to do, is absurd.
363.
Argentina argues that neither MEDA nor MASA have any legal standing to claim as far as gas distribution companies and power generators were prevented from passing through to their gas distribution tariffs and energy variable production costs in the well-head price of natural gas purchased from the producer. Bearing in mind the Argentine crisis of 2001-2002, the measures taken by ENARGAS and the Secretary of Energy in this respect were legitimate, reasonable and in accordance with the regulatory frameworks of natural gas and electricity
364.
Moreover, Argentina contends that there have been substantial increases in gas wellhead prices, and as stated by expert Greco "market prices for most part of the domestic demand are currently well above the level prior to 2002 and exceed the maximum projected values for the long-term contracts entered into in the late 1990s."125
365.
Further, Argentina argues that all the natural gas sales contracts entered into for export purposes were excluded from the pesification. Therefore, a substantial portion of the natural gas volume produced by the Claimants was not affected by the crisis at all. On the contrary, the decline in the production costs allowed the Claimants to benefit from the crisis.
366.
Argentina contends that the Hydrocarbons Law expressly provides for the possibility that the State may regulate natural gas pricing.126 Likewise, the Deregulations, invoked by the Claimants, do not provide for any right to set of the price of natural gas at will. On the contrary, the only reference made to natural gas prices sets forth exactly the opposite; gas prices are to be fixed by the Argentine State. Indeed, Presidential Decree No. 1212/89 established that "natural gas prices for users and producers shall be fixed on a monthly basis by the Ministry of Public Works and Services, through the Secretariat of Energy, until the market conditions include multiple suppliers."127
367.
Moreover, Argentina argues that the Aguaragüe and Sierra Chata concessions specifically refer to the Hydrocarbon Law and to the Deregulation Decrees, which provide for the regulation of natural gas by the State.128
368.
In sum, Argentina concludes that there is no rule that sets forth a right to set natural gas wellhead prices at will and there is no commitment in this respect in the hydrocarbon exploitation concessions either.

2. Pesification

a. The Claimants’ position

369.
As mentioned above, the Claimants assert that the pesification of domestic gas supply contracts interfered heavily with the Claimants’ contracts and prices in violation of the Legal Framework and their vested rights.
370.
Under Law 25,561 and Decree 214/02, the GOA unilaterally changed the provisions of private contracts between the Claimants and their domestic customers. These measures unilaterally converted Dollar-denominated obligations and receivables owed to the Claimants under gas supply contracts into Peso-denominated obligations at an artificial exchange rate of US$ 1: AR$ 1.
371.
This was done at the same time that the GOA abrogated the Convertibility Law and devalued the Argentine Peso through Law 25,561. By the end of May 2002, the exchange rate had reached US$l:AR$3.60, and currently is approximately US$l:AR$3.50. Thus, the GOA unilaterally changed private contracts so that the Claimants received only about 30% of the express contract price; this conduct flagrantly violated the Claimants’ right to freely agree on the prices of hydrocarbons and their byproducts.

b. Argentina’s position

372.
According to Argentina, the Claimants’ allegation that the pesification of contracts provided for by the Emergency Law and Decree No. 214/02 violated their right to freely agree on hydrocarbon prices in accordance with the statutory framework and hydrocarbon concessions and contracts is flawed.
373.
On the one hand, the Emergency Law sets forth the abandonment of the fixed exchange rate system which had been established by the Convertibility Law, yet devaluation had already taken place. Indeed, the devaluation was not a measure adopted by the Argentine government but the Government took certain measures to face the devaluation which occurred in the market - which then turned into an exchange rate overshooting. On the other hand, the whole Argentine economy was pesified and the parties were forced to restructure their mutual obligations, sharing the effects of the exchange rate modification in an equitable manner.
374.
However, it is clear that not only the pesification did not violate any bilateral investment treaty, but did not contradict any statutory framework or hydrocarbon concessions or contracts either. On the contrary, several Argentine courts have acknowledged the constitutionality of the pesification of contracts between private parties and the provision compelling parties to freely adapt agreed upon rules.129
375.
Furthermore, the reality demonstrates that contracts between private parties, which were governed by Argentine laws and affected by the pesification, were voluntarily adapted by the parties or, in the event of disagreement, by Argentine judges, posing no obstacle to the development of business in the country. Like any other contract between private parties, the contracts expressed in US Dollars to which the Claimants’ challenges refer were affected by the Emergency Law. This was true not only for such contracts as were executed by the Claimants as debtors but to those executed as creditors as well.
376.
However, natural gas purchase and sale agreements for export purposes were not affected by the pesification. Therefore, a substantial portion of the natural gas volume produced by the Claimants was not affected by the Emergency Law.
377.
The pesification of the whole Argentine economy affected the contracts invoked by the Claimants, as well as any other contract subject to Argentine jurisdiction. This general measure in principle established a 180-day term for the parties to negotiate the restructuring of their reciprocal liabilities, trying to share in a fair way the effects of the modification in the exchange ratio resulting from the pesification.130Then, relevant to this specific case, Decree 214/2002 established the adaptation of those contracts due to local inflation for the benefit of the creditor, the possibility of the parties' renegotiation of the terms of the contracts if the pesification had given rise to any unfair circumstance, and the right of the parties to resort to court to request an equitable adjustment if renegotiation between the parties were unsuccessful

c. The Tribunal’s Analysis

378.
Pesification was introduced by Law 25,651 and Decree 214/02 by which the Convertibility Laws was amended and the US Dollar-denominated obligations and receivables under domestic gas supply contracts were as of 6 January 2002 unilaterally converted into Peso denominated obligations at an artificial exchange rate of US $1 = AR $1. Pesification did not affect export contracts, which continued to be denominated in US Dollars.131
379.
The Claimants do not claim damages for the Government’s pesification of the economy as a general measure. What Argentina must defend are its measures that interfered with natural gas prices. The Claimants assert that they had specific commitments from the Government that they would benefit from deregulated prices and that they could freely agree to the terms of their natural gas supply agreements at the prices and currency of their choice. The Claimants contend, that therefore they were in a substantially different situation than the rest of "the whole Argentine economy" and therefore Argentina's observation that the effects of pesification reached the "whole economy" is irrelevant to this case.
380.
Argentina contends that there is no specific commitment to MEDA and MASA regarding the "pesification." The purported commitment of deregulated prices is a sectoral matter and has nothing to do with a general, an "across the board" measure, such as pesification. Both are independent from each other. Pesification only deals with the currency denomination of all domestic contractual obligations. All contracts denominated in US dollars or otherwise related to a foreign currency governed by Argentine law were affected by pesification.
381.
Article 3 of Decree 1969/93 concerning the Sierra Chata Permit provides:

"The Permit holder shall own and be entitled to freely dispose of the hydrocarbons produced in the Area of the Exploration permit, in accordance with Law 17,319, Article 15 of Decree No. 1055 dated October 10, 1989, Article 4 of Decree no.1212, dated November 8,1989, Articles 5 and 6 of Decree No. 1589, dated December 27, 1989, and Article 5 of Decree No. 2411, dated November 12,1991, whose terms are in force as of the signing date of the Memorandum of Understanding approved in Article 1 hereof shall be incorporated to the Exploration Permit during its effective term."

382.
Article 5 of Decree 1969/93 provides

"Every restriction to the free disposition referred to in Article 3 of this Decree shall entitle the Permit holder to receive during the period such a restriction is applied, an amount not lower than set in Article 6 of Decree No. 1589, dated. December 27, 1989."

383.
Article 4 of Decree 2446/92, which approved the Aguaragüe Contract provides:

"Y.P.F. SOCIEDAD ANÓNIMA,TECPEETROL SOCIEDAD AÓNIMA, AMPOLEX ARGENTINA S.A. AND PETROBAS INTERNACIONAL S.A. -BRASPETRO- shall own and be free to dispose of the Hydrocarbons extracted from the Aguaragüe area (Northwestern Basin), pro rata their respective shares in the Agreement as approved in Article 1, in accordance with provisions set forth in Article 6 of Law 17,319, Articles 13 and 15 of Decree No. 1055, dated October 10, 1989, Articles 5 and 6 of Decree No. 1589, dated December 27, 1989 and Article 5 of Decree No. 305, dated February 12, 1992".

384.
Article 6 of Decree 2446/92 provides:

"Any restriction to the free availability of hydrocarbons referred to in Article 4 above, shall entitle the parties to the Agreement to receive, over the term of the restriction, an amount, which may not be lower than that specified in Article 6 of Decree 1589, dated December 27, 1989, unless a higher percentage is otherwise provided for by any other rule."

385.
The 1989 Deregulation Decrees established that hydrocarbon producers would enjoy the right to freely market their production, both in the domestic market and abroad (Decree 1055/89, Art. 15, Decree 1212/89 Art.9. Decree 1589/89). Moreover, those Deregulation Decrees guaranteed that in the event the rights to freely market gas were restricted, producers would be entitled to a minimum price linked to international hydrocarbon prices (Decree 1589/89, Art. 6). Thus those rights have by Decree 1969/93 and Decree 2446/92 been incorporated in the Sierra Chata Concession and in the Aguaragüe Agreement.
386.
As mentioned above the Claimants’ claims are not about pesification per se as a general measure, but rather on the compounded impact of interfering with freely negotiated contracts and prices and subsequently taking measures that impeded any price negotiations. Since the pesification interfered with freely agreed contract prices, the Claimants claim to have received only about 30 per cent of the agreed contract price as a result of pesification. Therefore, the Claimants claim damages for the effect of pesification on their private contracts for January-February 2002.
387.
The Claimants' right to freely market gas, both in the domestic market and abroad as well as the Claimants right to minimum price in the event of restriction have, as mentioned above, been incorporated in both the Sierra Chata Concession and the Aguaragüe Contract and are consequently also contractual rights. Therefore, the Tribunal finds that pesification was in breach of the Claimants' contractual rights as far as it interfered with the Claimants' freely negotiated contracts for January-February 2002.

3. Interference in Prices paid by Distributors and Power Generators

a. The Claimants’ position

388.
The Claimants contend that the GOA effectively prevented power generators and gas distributors — the Claimants’ primary domestic customers — from passing through any price increase to their own customers. Consequently, the Claimants and other producers were unable to renegotiate price increases with their main customers, with the result that the price of gas at the wellhead remained frozen for years, because the GOA:

• prevented the gas distribution companies from passing through any price increase of gas at the wellhead (even in Peso terms) to their customers, in violation of the terms of the gas distribution licenses; and

• prevented power generators from including any price of gas in excess of the Price in Pesos allowed by ENARGAS in their declaration of variable costs for purposes of CAMMESA's determination of the energy spot price.

389.
These measures violated the GOA’s guarantees under the Legal Framework and the contracts and licenses entered into by the GOA. They also effectively eliminated any chance of renegotiating the Claimants’ gas supply contracts, and therefore, constituted an unlawful interference with their freely-agreed terms.
390.
Pursuant to Article 8 of Decree 214/02, the GOA instructed courts with jurisdiction over controversies relating to these matters to maintain and preserve existing contracts in Peso terms. In practice, this measure precluded parties from terminating contracts prior to their expiration due to the GOA’s alteration of the contract price or contract price-fixing mechanism.
391.
The renegotiation of public service contracts between the GOA and gas and power distribution companies, a process provided for in Law 25,561 has been a massive failure. To renegotiate these contracts, the GOA demands that public utility companies waive their rights—as well as those of their foreign shareholders—to initiate or continue international arbitration proceedings against the GOA based on the GOA measures.
392.
Although the GOA initially declared that it would conclude these negotiations within 120 days it passed various laws, decrees, and resolutions that have delayed the tariff renegotiations for more than seven years.
393.
Argentina's attempts to justify the measures that ENARGAS (the natural gas regulator) took to restrict the pass-through of price increases to natural gas distribution tariffs constitutes another admission that the Government took measures to manipulate gas prices.
394.
Argentina alleges that Article 38(c) of the Gas Law and Decree 1411/94 provided ENARGAS with the power to interfere in natural gas prices by regulating gas distribution tariffs. However, the regulations Argentina invokes apply in a completely different context and do not authorize ENARGAS to absolutely prohibit gas distributors from passing through price increases to natural gas distribution tariffs.
395.
Decree 1411/94 and the other regulations that Argentina cites were designed to operate in the context of the semi-annual price-adjustment contemplated in the Gas Law and the gas distribution licenses, as well as certain other limited situations. In this context, Decree 1411/94 granted ENARGAS the authority to monitor gas prices in order to ensure that the prices that gas distribution companies reported were negotiated in a competitive environment and on an arm’s length basis. In other words, the scope of ENARGAS’s authority to regulate gas distribution tariffs was limited to protecting consumers from market collusion and price-fixing.
396.
ENARGAS’s power to ensure market competition did not encompass the authority to prohibit the pass-through of any increases of gas wellhead prices in order to suppress gas prices at artificially low levels, as ENARGAS did in this case. To the contrary, Article 38(c) of the Gas Law expressly confined ENARGAS’s ability to regulate the pass-through of gas prices to cases in which the price agreed between the producer and the distribution company exceeds the prices agreed by other distribution companies in similar situations.
397.
Consistent with the Gas Law’s limitation on ENARGAS’s ability to regulate gas distribution tariffs, Decree 1411/94 requires that ENARGAS verify whether the prices agreed by distribution companies result from a transparent, open, and competitive process, as well as from the distribution company’s reasonable efforts to obtain the best available prices and conditions. If ENARGAS is unable to establish that a price increase reported by a particular distributor fails to meet these requirements, then it may not limit the pass-through of that price increase.