Argentina takes the offensive as Siemens pleads guilty to corruption charges

Investment Treaty News | 23 December 2008

Argentina takes the offensive as Siemens pleads guilty to corruption charges

By Damon Vis-Dunbar

Argentina has refused calls by Siemens to suspend proceedings at the International Centre for the Settlement of Investment Disputes (ICSID) in which a committee is considering Argentina’s request to revise a 2007 award, following the admission by the German firm that it had bribed Argentinean officials.

On 15 December 2008, Siemens AG, a German corporation, pleaded guilty to large-scale corruption charges, as Siemens admitted that its employees made illegal payments to government officials in several countries in order to win contracts. In a deal struck with U.S. and German authorities, Siemens will pay US$1.36 billion in penalties.

The bribery confession included corruption in Argentina, where Siemens’ Argentinean subsidiary colluded with government officials in order to obtain a contract for a US$1 billion national identity card project. When that contract was cancelled in 2001, Siemens responded by filing a claim for violations of the German-Argentina bilateral investment treaty. Some six years later, the tribunal awarded Siemens US$217 million in damages.

Rumors of corruption between Siemens and Argentinean officials have existed for some years, and Argentina had raised the issue during the arbitration proceedings, although an effort to submit evidence on the matter was rejected by the tribunal, on the grounds that Argentina had waited too long to do so.

Since the 2007 award, however, various investigations and court proceedings in the United States and Germany brought strength to the corruption allegations.

In the summer of 2008, a Siemens official admitted in a German court to paying bribes in Argentina. Based on this new evidence, Argentina submitted a request to ICSID for a revision of the award. To bolster its argument that the 2007 ICSID award should be revised, Argentina points to several investment treaty cases in which tribunals have declined jurisdiction on the grounds that the investment was not made in accordance with domestic laws.

Under ICSID rules, a party can request a revision to an award “on the ground of discovery of some fact of such a nature as decisively to affect the award, provided that when the award was rendered that fact was unknown to the Tribunal and to the applicant and that the applicant’s ignorance of that fact was not due to negligence.”

Following its admission of guilt on 15 December 2008, Siemens wrote to the ICSID committee hearing Argentina’s request for a revision to the 2007 award, asking for a three month suspension of the proceedings. However, Argentina has declined this invitation to suspend the proceedings. Argentina says that it is understands that both parties would need to consent in order for the committee to grant a suspension of the proceedings.

Posted Dec 23 2008, 03:13 AM by Damon Vis-Dunbar

source: ITN