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.