Argentina scores second win in World Bank arbitration committee

Dow Jones Newswires | 08-02-10

Argentina Scores Second Win In World Bank Arbitration Committee

By Shane Romig

Argentina scored its second victory in just over a month at the World Bank’s arbitration tribunal, winning an appeal to dismiss $106 million in damages over a disputed energy contract.

The International Center for Settlement of Investment Disputes, or Icsid, dismissed the claims lodged by Enron Creditors Recovery Corp and Ponderosa Assets L.P. late Friday. That follows a similar ruling at the end of June which overturned the $128 million award granted to Sempra Energy International.

The government argued in both cases that the initial Icsid tribunal overlooked an emergency clause in the bilateral investment treaty signed with the U.S., said Florencia Stero, a spokesman for Argentina’s Office of the Attorney for the National Treasury. The agency is roughly equivalent to the U.S. attorney general and spearheads Argentina’s Icsid defenses.

Contracts signed between the government and overseas companies are generally covered by bilateral trade treaties between Argentina and the companies’ host countries. Most of those treaties specify the World Court’s Icsid arbitration tribunals as the forum for resolving disputes. While judgments are technically not subject to appeal, the rulings are can be submitted to a review committee with the power to throw out the decisions.

Argentina has consistently argued that the extreme circumstances justified extreme action and were covered by the emergency clause in trade treaties. In cases involving the bilateral trade agreement with the U.S., Argentina asserts the emergency clause is "self-judging," meaning that either country has the right to decide on its own terms whether a particular event fell within its scope.

With the dismissal of a second complaint based on the "self-judging" clause, there is a trend towards the review committees accepting that argument, Stero said.

However, many companies continue to push forward on their claims. Also on July 30, an Icsid tribunal ruled in favor of GDF Suez, Suez Environment and AGBAR in a dispute over the termination of water-works concessions in Buenos Aires and Santa Fe provinces, Suez Environment said in a press release Sunday. That tribunal hasn’t determined the amount of the award yet, but Argentina already plans to ask for a review committee to be formed to have the ruling annulled, Stero said.

Almost 30 cases against Argentina are moving through Icsid tribunals. Virtually all of them stem from Argentina’s economic crisis earlier this decade when the country defaulted on its sovereign debt and devalued the peso, which had been pegged at one-to-one against the U.S. dollar.

The Argentine government issued an emergency decree in January 2002 that converted all contracts from dollars into devalued pesos. Among those affected were foreign-owned utilities, which also saw their newly devalued rates frozen.

The move prompted scores of separate breach-of-contract damages claims under various bilateral investment treaties established under the Icsid standard—by far the highest number ever against a single country. So far, more than $900 million in damages have been awarded against Argentina, but none of the companies have been able to collect on the judgements.

 By Shane Romig, Dow Jones Newswires; 54-11-4103-6738;

source: Dow Jones