Procedural Background and Key Issues

This document is the final Award rendered by an ICSID tribunal in the dispute between CMS Gas Transmission Company (Claimant) and the Argentine Republic (Respondent) under the 1991 Argentina-United States Bilateral Investment Treaty (BIT). The claims arose from a series of emergency measures enacted by Argentina during its severe economic crisis of 1999-2002, which fundamentally altered the regulatory framework for the Claimant's investment in the gas transportation company, Transportadora de Gas del Norte S.A. (TGN).

The central issues before the Tribunal were whether Argentina's measures—including the abandonment of the USD-peso currency peg, the "pesification" of tariffs previously calculated in US dollars, and the suspension of tariff adjustment mechanisms—breached its obligations under the BIT. The Claimant alleged violations of the standards for fair and equitable treatment (FET), protection against unlawful expropriation, and the umbrella clause. Argentina defended its actions primarily on the grounds of a state of necessity, arguing that the crisis justified the measures and excused any resulting liability.

Tribunal's Findings on the Merits

The Tribunal found that Argentina had breached its obligations under the BIT. It determined that the Claimant had an acquired right to a tariff regime calculated in US dollars and periodically adjusted, which formed an essential part of the stable and predictable legal framework that induced the investment. The Tribunal held that Argentina's measures destroyed this stability, thereby violating the FET standard under Article II(2)(a) of the BIT. It also found a breach of the umbrella clause in Article II(2)(c), concluding that Argentina had failed to observe specific commitments made to the investment.

However, the Tribunal rejected the expropriation claim. It reasoned that while the measures had a severe negative impact on the investment's value, they did not rise to the level of a substantial deprivation required to constitute an indirect expropriation under international law, as the Claimant retained ownership and control of its investment.

State of Necessity Defense

The Tribunal conducted a thorough analysis of Argentina's state of necessity defense under both customary international law (as reflected in Article 25 of the ILC Articles on State Responsibility) and the BIT's specific emergency clauses. It concluded that the defense was not met. While acknowledging the severity of the crisis, the Tribunal found that Argentina's own policies had contributed to the emergency and that the measures taken were not the "only way" to safeguard its essential interests. Consequently, the state of necessity did not preclude the wrongfulness of Argentina's acts, although the Tribunal considered the crisis context relevant to the determination of compensation.

Decision on Quantum and Relief

The Tribunal awarded the Claimant damages in the amount of US$133.2 million. It utilized a Discounted Cash Flow (DCF) methodology to assess the loss but made significant adjustments to the Claimant's valuation model concerning revenue forecasts, the discount rate, and other assumptions. The Award also established a mechanism whereby the Claimant must transfer its shares in TGN to Argentina upon payment of an additional sum representing the residual value of the shares. The costs of the arbitration were ordered to be borne in equal shares by the parties.

Procedural Context and Key Issue

This document is the decision of the ad hoc Committee constituted under the ICSID Convention to hear the Argentine Republic's application for annulment of the Award of 12 May 2005. The decision specifically addresses Argentina's request for the continuation of the stay of enforcement of the Award, which was provisionally granted upon the registration of its annulment application pursuant to ICSID Arbitration Rule 54(2).

The central issue before the Committee was whether to continue the stay and, if so, whether to impose conditions, such as the provision of a bank guarantee. This determination turned on the Committee's assessment of the risk of prejudice to the Claimant, CMS Gas Transmission Company, which hinged on the credibility of Argentina's commitment to comply with the Award if its annulment application were to fail.

Parties' Submissions

The Argentine Republic argued for an unconditional continuation of the stay, asserting that immediate enforcement would cause it irreparable harm and that it possessed compelling grounds for annulment. It contended that the ICSID Convention imposes no obligation to post a bond and that its history demonstrated compliance with international awards. In support of its position, Argentina ultimately provided a formal written undertaking to recognize the Award as binding and enforce its pecuniary obligations if annulment was not granted.

Conversely, the Claimant, CMS, requested that the stay be terminated unless Argentina provided an irrevocable and unconditional bank guarantee. CMS argued that numerous public statements by Argentine officials cast serious doubt on the State's willingness to voluntarily comply with an adverse ICSID award, suggesting an intent to subject such awards to domestic constitutional review. CMS contended that the undertaking offered by Argentina's agent was insufficient to bind the State and overcome these doubts.

The Committee's Analysis and Decision

The Committee analyzed its discretion under Article 52(5) of the ICSID Convention, reviewing prior jurisprudence on the matter. It affirmed the principle that a respondent State seeking a stay should demonstrate it will comply with the award if not annulled, and that a Committee may order security if doubt exists. The Committee considered the parties' arguments regarding the hierarchy of the ICSID Convention within Argentina's domestic legal order but did not find it necessary to resolve that dispute.

The decisive factor in the Committee's reasoning was the formal undertaking provided on 12 June 2006 by Argentina's agent, the Procurador del Tesoro de la Nación. The Committee found this letter to be an irrevocable commitment that effectively dispelled the legitimate doubts CMS had previously raised. Relying on this formal assurance, the Committee concluded that Argentina had demonstrated that CMS would not be prejudiced by the grant of a stay, beyond the incidental delay inherent in the annulment process, which could be remedied by the payment of interest.

Operative Part

The Committee unanimously decided to continue in force the stay of enforcement of the Award pending its final decision on the application for annulment. The stay was granted without the condition of a bank guarantee. The Committee also clarified that the stay applied to the entire Award, including the one-year time limit for Argentina to exercise its option to purchase the Claimant's shares, as the condition precedent for that transfer—payment of the compensation—was itself stayed.