This HTML version is machine-generated. Always consult the original document.

PCA Case No. 2015-12

IN THE MATTER OF AN ARBITRATION UNDER THE AGREEMENT BETWEEN THE
GOVERNMENT OF THE REPUBLIC OF ARGENTINA AND THE GOVERNMENT OF THE
UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE
PROMOTION AND PROTECTION OF INVESTMENTS, DATED 11 DECEMBER 1990

- and -

THE UNCITRAL ARBITRATION RULES (AS REVISED IN 2010)

- between –

ICS INSPECTION AND CONTROL SERVICES LIMITED (UNITED KINGDOM)

(the “Claimant”)

- and –

THE ARGENTINE REPUBLIC

(the “Respondent”, and together with the Claimant, the “Parties”)

FINAL AWARD

ARBITRAL TRIBUNAL:
Mr. Jernej Sekolec (Presiding Arbitrator)
Mr. Pierre-Yves Tschanz
Prof. Dr. Domingo Bello Janeiro

SECRETARY TO THE TRIBUNAL:
Mr. Martin Doe Rodríguez

REGISTRY:
Permanent Court of Arbitration

29 April 2024

[Page i]

[Page iv]

LIST OF DEFINED TERMS

[Page v]

[Page vi]

[Page vii]

[Page 1]

I. INTRODUCTION

A. THE PARTIES

1. The Claimant in these proceedings is ICS Inspection and Control Services Limited (formerly known as Swipco Limited) (“ICS” or the “Claimant"), a company incorporated, constituted, and registered under the laws of England and Wales, with registered number 03186918, having its registered office at 5th Floor, 86 Jermyn Street, London SW1Y 6AW. The Claimant is represented in this case by:

Ms. Rajinder Bassi
Mr. Chris Colbridge (until 13 September 2023)
Mr. Philipp Kurek (until 13 September 2023)
Kirkland & Ellis International LLP

Mr. Samuel Wordsworth KC
Mr. Lucas Bastin
Essex Court Chambers

2. The Respondent in these proceedings is the Argentine Republic (the "Respondent" or "Argentina", and together with the Claimant, the “Parties”). The Respondent is represented in this case by:

Dr. Rodolfo Carlos Barra, Procurador General de la Nación
Dr. Carlos Alberto Zannini, Procurador General de la Nación (until 14 December 2023)
Dr. Horacio Pedro Diez, Subprocurador del Tesoro de la Nación (until 14 December 2023)
Dr. Sebastián Antonio Soler, Subprocurador del Tesoro de la Nación (until 14 December 2023)
Dra. Mariana Mabel Lozza, Directora Nacional de Asuntos y Controversias Internacionales
Procuración del Tesoro de la Nación

B. THE ARBITRAL TRIBUNAL

3. The Tribunal is composed of Mr. Pierre-Yves Tschanz (appointed by the Claimant), Professor Dr. Domingo Bello Janeiro (appointed by the Respondent), and Mr. Jernej Sekolec, appointed by the Secretary General of the Permanent Court of Arbitration (the “PCA”) in his capacity as the appointing authority in this matter. Their contact details are as follows:

Mr. Pierre-Yves Tschanz
Tschanz Arbitration
c/o Lawffice SA, 22 rue du Général-Dufour

[Page 2]

PO Box 315
1211 Geneva 4
Switzerland
Tel.: +41 22 500 1456
E-mail: [email protected]

Prof. Dr. Domingo Bello Janeiro
Facultad de Derecho
Universidad de La Coruña
Campus de Elviña, s/n. 15071
La Coruña, Spain
Tel.: +34 981167000, ext. 1546
E-mail: [email protected]

Mr. Jernej Sekolec
Scheibenbergstraße 38/2/32
A-1180 Vienna
Austria
Tel: +43 720 308 971
E-mail: [email protected]

C. BRIEF IDENTIFICATION OF THE DISPUTE

4. The arbitration concerns the Claimant's allegation that the Respondent breached its obligations under Article 2 of the Treaty through the treatment accorded to the Claimant by Argentina in connection with an agreement entered into by the Claimant and Argentina's Ministry of Economy and Public Finances, the Ministerio de Economía y Finanzas Públicas de la República Argentina (formerly Ministerio de Economía y Obras y Servicios Públicos) (“MECON") on 11 March 1998, relating to the provision of auditing services by the Claimant (the “Contract”) in the context of a government-supervised programme under which goods bound for import into Argentina would be inspected prior to shipment to Argentina (the “Programme”).¹

5. The following quotation from the Claimant's Statement of Claim summarises the main aspects of the dispute:

4. In summary, and as described in more detail below, the dispute between the parties (which has been the subject of numerous proceedings between the parties for more than a decade) arises with regard to the treatment accorded to the Claimant by the Argentine Republic (“Argentina” or the “Respondent”) in connection with an agreement entered into by the Claimant and Argentina's Ministry of Economy and Public Finances, the Ministerio de Economía y Finanzas Públicas de la República Argentina (formerly Ministerio de Economía y Obras y Servicios Públicos) ("MECON") on 11 March 1998, relating to the provision of auditing services by the Claimant (the "Contract") in the context of a government-supervised programme

¹ Claimant's Statement of Claim, dated 16 December 2015, para. 4. See also, Respondent's Memorial on Objections to the Jurisdiction of the Arbitral Tribunal, dated 15 April 2016, para. 4. ↩

[Page 3]

under which goods bound for import into Argentina would be inspected prior to shipment to Argentina (the "Programme").

5. The Contract provided that the Claimant, together with Argentina's National Internal Auditing Commission, the Sindicatura General de la Nación (“SIGEN”), was to audit the pre-shipment inspection of imports into Argentina (the "Ordinary Services").

6. In addition to the Claimant's Ordinary Services, Argentina also requested the Claimant to provide additional non-audit services on an ad hoc basis from time to time (the "Special Services”), which were to be remunerated based on the market value of such services.

7. The Claimant's fees for Ordinary Services were to be calculated as a percentage of the FOB, FOR or FOT2 value of each audited inspection certificate (invariably denominated in US Dollars), with the caveat that the Claimant's fees for each quarter could not be less than 4% of the amount invoiced by the inspection companies, nor exceed 10% of the amount invoiced by the inspection companies (the "10% Fee Cap"). In this respect, so as to enable the Claimant to comply with the 10% Fee Cap, the Contract required Argentina to implement an adequate selection system to identify shipments to be audited.

8. From the outset, there were significant issues with the selection of certificates to be audited. Despite its clear and unequivocal obligations to do so, and in spite of the Claimant's repeated complaints and requests, Argentina never implemented a functioning framework for the services to be rendered by the Claimant.

9. Argentina's failure to implement an adequate selection system made it impossible for the Claimant to comply with the 10% Fee Cap. As a matter of Argentine law, therefore, Argentina was precluded from invoking the 10% Fee Cap vis-à-vis the Claimant, who was consequently entitled to full payment of its Ordinary Service fees, irrespective of whether such fees were above or below the cap.

10. When Argentina decided to terminate the Programme in late 2001, the Claimant issued final invoices for services rendered and requested that Argentina settle all outstanding invoices.

11. On 6 January 2002, Argentina enacted Law 25.561 (the “Emergency Law”), repealing Law 23.928 (the "Convertibility Law") which for the last ten years had stabilised the exchange rate between the Argentine Peso and the US Dollar such that 1 Argentine Peso was equal to 1 US Dollar. The Emergency Law also granted special powers to the President to determine the exchange rate between the Argentine Peso and any other foreign currency. In this context, the President issued Decree 214/02 which provided that (i) obligations to pay sums of money in US Dollars existing as of the time of the enactment of the Emergency Law were to be translated into Argentine Pesos; and (ii) enforceable obligations to pay sums of money in US Dollars should be translated at a rate of 1:1, adding a Stabilisation Ratio (Coeficiente de Estabilización de Referencia “CER") published by Argentina's Central Bank.

12. Despite the Claimant's repeated demands for payment, the outstanding invoices remained unpaid. Accordingly, in March 2002 the Claimant filed an administrative claim seeking payment of its outstanding invoices.

13. In August and September 2002, whilst the administrative claim was still pending before MECON, the Comité Ejecutivo del Programa de Inspecciones de Preembarque de Importaciones (the “Committee") (the body responsible for the day-to-day supervision and enforcement of the Programme) wrote to the Claimant:

(a) rejecting the Claimant's invoices for Ordinary Services and demanding that:

(i) the invoices be reduced to comply with the 10% Fee Cap;

(ii) the invoices be pesified (i.e. re-issued in Pesos using the by then historic 1:1 US Dollar/Peso exchange rate); and

[Page 4]

(b) rejecting the Claimant's Special Services invoices.

14. Furthermore, in June 2003 Argentina wrote to the Claimant demanding a further 13% reduction of certain invoices, purportedly in accordance with Presidential Decree 1060/01 ("PD 1060/01").

15. In order to ease the Claimant's rapidly deteriorating financial position and to recover at least some of the outstanding amounts, the Claimant eventually gave in to Argentina's demands and re-issued reduced and pesified invoices (whilst expressly reserving its rights in respect of these wrongful reductions).

16. In December 2004, with the dispute between the parties still unresolved, the Claimant filed an updated and amplified administrative claim (taking into account the above wrongful reductions).

17. In 2006, after years of negotiations, Argentina finally paid the Claimant ARS 1,230,181.68 in part-payment of the Claimant's outstanding invoices. However, Argentina did not (and to date has not) made any payments in respect of:

(a) amounts above the 10% Fee Cap in relation to the Claimant's Ordinary Services invoices;

(b) amounts relating to Argentina's pesification of the Claimant's invoices;

(c) amounts relating to Argentina's 13% reduction of certain of the Claimant's invoices pursuant to its purported application of PD 1060/01; and

(d) any of the Special Services performed by the Claimant.

18. In light of Argentina's refusal to make any further payment to the Claimant in respect of its Ordinary and Special Services invoices, the Claimant formally notified Argentina of its claim under the BIT by notice of 27 November 2006.

19. Despite the Claimant's best efforts to settle the dispute, including a period of settlement discussions between December 2006 and April 2007, the parties failed to reach an amicable settlement. Accordingly, in June 2009 (with the administrative claim still unresolved) the Claimant commenced arbitration under the UNCITRAL Rules pursuant to the terms of the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland (the "UK") and Argentina for the Promotion and Protection of Investments (the "BIT"). In November 2010, Argentina formally objected to the Tribunal's jurisdiction on the basis that the Claimant had failed to first submit the dispute to the Argentine courts before commencing arbitration. In accordance with the Tribunal's First Procedural Order, the proceedings on the merits were suspended pending the Tribunal's determination of the question of jurisdiction under the BIT. Following an oral hearing in The Hague, the Tribunal rendered its Award in February 2012, finding that it did not have jurisdiction over the dispute due to the Claimant's failure to first submit the dispute to the Argentine courts for a period of at least 18 months.

20. Following the Tribunal's Award on jurisdiction, the Claimant duly submitted the dispute to the Argentine courts in February 2012.

21. Almost two years elapsed, and despite having diligently pursued its claim, the proceedings had not (and still have not) even reached the evidentiary stage yet. Faced with the Argentine courts' inability or unwillingness to resolve the dispute in a timely manner, the Claimant had no choice but to once again resort to international arbitration under the BIT in order to finally be duly compensated (as it should have been more than a decade ago) for the services it has provided to Argentina.

22. Accordingly, by Notice of Arbitration dated 21 July 2014, the Claimant commenced arbitration proceedings against Argentina pursuant to Article 8 of the BIT and the UNCITRAL Rules.

23. In its Notice of Arbitration, and as further particularised in this Statement of Claim, the Claimant asserts that Argentina breached Article 2(2) of the BIT by:

[Page 5]

(a) failing to afford the Claimant's investment fair and equitable treatment;

(b) treating the Claimant's investment in an unreasonable or discriminatory manner; and

(c) failing to afford the Claimant's investment full protection and constant security; and

(d) failing to observe the obligations Argentina has entered into with regards to the Claimant's investment;

causing the Claimant a loss of USD 128 million.

24. Argentina has consented to this dispute being submitted to international arbitration under the UNCITRAL Rules through its offer to arbitrate made in Article 8 of the BIT. By filing its Notice of Arbitration and instituting proceedings against Argentina, the Claimant accepted Argentina's offer.²

6. The Respondent submits that the Claimant's claims are precluded on the basis of a number of preliminary objections, that the Claimant's claims have no merit and that, in any event, necessity under customary international law would preclude any unlawfulness of its conduct. The Respondent further submits that the Claimant is not entitled to the relief it seeks.

7. On 8 July 2019, the Tribunal issued its Award on Jurisdiction (the “Award on Jurisdiction”), in which it decided "that it has jurisdiction to consider the claims raised by the Claimant" and that it "defer[red] all questions not decided [in the Award on Jurisdiction] to the next phase of the proceedings", notably including the Respondent's defences pertaining to acquiescence and extinctive prescription.³

² Statement of Claim, paras. 4-24 (emphasis and footnotes omitted). ↩

³ Award on Jurisdiction, paras. 379-380. ↩

[Page 6]

II. PROCEDURAL HISTORY

8. The Tribunal's Award on Jurisdiction recounts in detail the procedural history of this arbitration from its commencement up until the date it was rendered.⁴ The following sections recall only the key procedural details from the early phase of the proceedings and summarizes developments since 8 July 2019.

A. COMMENCEMENT OF THE ARBITRATION

9. By Notice of Arbitration dated 21 July 2014, the Claimant commenced arbitral proceedings against the Respondent under the Arbitration Rules of the United Nations Commission on International Trade Law (the “UNCITRAL Rules") pursuant to Article 8 of the Agreement between the Government of the Republic of Argentina and the Government of the United Kingdom of Great Britain and Northern Ireland for the Promotion and Protection of Investments, dated 11 December 1990, entered into force on 19 February 1993 (the “Treaty”).⁵

10. Pursuant to Article 3(2) of the UNCITRAL Rules, arbitral proceedings are deemed to have commenced on the date on which the Notice of Arbitration was received by the Respondent, i.e., 1 August 2014.

11. On 20 November 2014, the Claimant appointed Mr. Pierre-Yves Tschanz as the first arbitrator.

12. On 18 December 2014, the Respondent appointed Professor Domingo Bello Janeiro as the second arbitrator.

13. On 8 June 2015, the Secretary-General of the PCA appointed Mr. Jernej Sekolec as presiding arbitrator.

14. On 29 July 2015, the Tribunal issued Procedural Order No. 1, which included Terms of Appointment for the Tribunal. Paragraph 12 of Procedural Order No. 1 foresaw the possibility for the Respondent to contest the Tribunal's jurisdiction as a preliminary matter.

⁴ Award on Jurisdiction, Section III. ↩

⁵ Treaty (C-1). ↩

[Page 7]

B. JURISDICTIONAL PHASE

15. On 16 December 2015, the Claimant submitted its Statement of Claim (the "Statement of Claim") accompanied by the witness statement of Juan Antonio Santamaría (the “First Santamaría Statement"), the expert report of Alberto Bianchi (the “First Bianchi Report"), and the expert report of Santiago Dellepiane Avellaneda (the “First Dellepiane Report").

16. On 15 April 2016, the Respondent submitted its Memorial on Objections to the Jurisdiction of the Arbitral Tribunal.

17. On 5 August 2016, the Claimant submitted its Counter-Memorial on Jurisdiction.

18. On 20 October 2016, the Respondent submitted its Reply-Memorial on Objections to the Jurisdiction of the Arbitral Tribunal.

19. On 9 January 2017, the Claimant submitted its Rejoinder on Jurisdiction.

20. On 15 February 2017, the Tribunal issued Procedural Order No. 2.

21. On 28 February and 1 March 2017, a hearing on jurisdiction was held at the Peace Palace in The Hague, the Netherlands (the “Hearing on Jurisdiction").

22. On 8 July 2019, the Tribunal issued its Award on Jurisdiction, in which the Tribunal decided:

a) that it has jurisdiction to consider the claims raised by the Claimant; and
b) to defer all questions not decided herein to the next phase of the proceedings.⁶

23. In particular, with respect to the Respondent's defences of acquiescence and prescription, the Tribunal held as follows:

The Tribunal considers it more prudent to postpone consideration of acquiescence and prescription to the merits stage

On the basis of the Parties' positions summarized above in paragraphs 369-378, the Tribunal accepts that the defences of acquiescence and extinctive prescription address the substance of the dispute and not the power of the Tribunal to rule on them. That characterization of the defences in itself would not necessarily prevent the Tribunal from ruling on the defences in the present award. Nevertheless, the Tribunal considers that the factual basis for reaching a decision on the defences may require an assessment of the Parties' behaviour and statements over a long period of time during and after the performance of the Contract, while the legal considerations may involve points of international law and the interaction of international and national law. Because of the complexity of those considerations, the Tribunal is of the

⁶ Award on Jurisdiction, para. 380. ↩

[Page 8]

view that it is more prudent to postpone these considerations to the merits stage, when the Tribunal will be sure that it has before it the complete factual and legal basis of the dispute.⁷

C. WRITTEN PHASE ON THE MERITS

24. On 18 July 2019, the Tribunal issued Procedural Order No. 3, in which it established a procedural timetable for the merits phase of the proceedings.

25. By letter dated 15 August 2019, the Tribunal determined that a hearing on the merits would be held for up to five hearing days from 1 to 5 March 2021 (the “Hearing on the Merits").

26. By e-mail of 26 August 2019, the Tribunal adopted an amended procedural calendar which had been agreed upon by the Parties on 23 August 2019.

27. On 6 December 2019, the Respondent submitted its Statement of Defence (the "Statement of Defence") accompanied by the expert report of Julio Pablo Comadira (“First Comadira Report"), the expert report of José P. Dapena (“First Dapena Report”), the witness statement of Amelia Acosta (“First Acosta Statement”), the witness statement of Angela Cupello ("First Cupello Statement"), and the witness statement of Eduardo Ratti (“Ratti Statement").

28. On 7 February 2020, the Claimant submitted its requests for document production. On 27 February 2020, the Respondent submitted its responses and objections to the Claimant's requests for document production, and the Claimant thereafter submitted its responses to the Respondent's objections and requested a Tribunal decision on disputed requests on 9 March 2020.

29. On 3 April 2020, the Tribunal issued Procedural Order No. 4, ruling on the Claimant's document production requests.

30. On 10 June 2020, the Claimant submitted its Reply Memorial (the "Reply") accompanied by the second witness statement of Juan Antonio Santamaría (“Second Santamaría Statement"), the second expert report of Dr. Alberto B. Bianchi (“Second Bianchi Report”), and the second expert report of Santiago Dellepiane Avellaneda (“Second Dellepiane Report").

31. On 10 August 2020, the Respondent submitted its document production requests. On 1 September 2020, the Claimant submitted its responses and objections to the Respondent's document

⁷ Award on Jurisdiction, para. 379. ↩

[Page 9]

production requests, and the Respondent thereafter submitted its responses to the Claimant's objections and requested a Tribunal decision on disputed requests on 11 September 2020.

32. On 1 October 2020, the Tribunal issued Procedural Order No. 5, ruling on the Respondent's document production requests.

33. On 9 December 2020, the Respondent submitted its Rejoinder Memorial (the "Rejoinder") accompanied by the second expert report of Julio Pablo Comadira (“Second Comadira Report”), the second expert report of José P. Dapena (“Second Dapena Report"), the second witness statement of Amelia Acosta (“Second Acosta Statement"), and the second witness statement of Angela Cupello (“Second Cupello Statement").

34. On 26 January 2021, following a request by the Respondent, and after giving Claimant an opportunity to comment thereon, the Tribunal re-scheduled the Hearing on the Merits so that it would be held by videoconference for up to seven hearing days on 6-9 and 12-14 April 2021.

35. On 4 February 2021, the Tribunal circulated a draft of Procedural Order No. 6, regarding the upcoming Hearing on the Merits, for the Parties' comments.

36. On 23 February 2021, the Parties submitted simultaneously their notifications of the witnesses which they intended to cross-examine at the Hearing on the Merits.

37. On 11 March 2021, the Tribunal, the Parties, and the PCA held a pre-hearing videoconference.

38. On 15 March 2023, the Tribunal issued Procedural Order No. 6, regarding the Hearing on the Merits.

D. HEARING ON MERITS

39. Between 6-9 and 12-14 April 2021, the Parties and the Tribunal held the Hearing on the Merits by videoconference.

40. The following persons participated in the Hearing on the Merits:

Tribunal
Mr. Jernej Sekolec (Presiding Arbitrator)
Mr. Pierre-Yves Tschanz
Prof. Dr. Domingo Bello Janeiro

[Page 10]

Claimant

Bassam Khoury
Carlos Schiopetto
Party Representatives

Samuel Wordsworth
Lucas Bastin
Essex Court Chambers

Chris Colbridge
Philipp Kurek
Alexander Rayner
Kirkland & Ellis International LLP

Federico Sivak
Lauren Winne
Berkeley Research Group

Respondent

Carlos Alberto Zannini
Sebastián Soler
Mariana Lozza
María Alejandra Etchegorry
José Ryb
Annabella Sandri Fuentes
María Laura Pessarini
Carolina Catanzano
Agustina Antoci Richieri
Julian Rivainera
Nicolás Duhalde
Emiliano Leanza
Adriana Cusmano
Daiana Ruth Baranchuk
Procuración del Tesoro de la Nación

PCA

Mr. Martin Doe Rodríguez (Secretary to the Tribunal)
Ms. Marihu Contreras Medina
Ms. Alejandra Martinovic

Court Reporters

Mr. David Kasdan
Mr. Dante Rinaldi
Ms. Eliana Da Silva
Ms. Regina Spector

Interpreters

Ms. Silvia Colla
Mr. Daniel Giglio

[Page 11]

41. The following fact and expert witnesses were examined at the Hearing on the Merits:

Fact Witnesses

Juan Antonio Santamaría
Amelia Ana Acosta
Angela Beatriz Cupello

Legal Experts

Alberto Bianchi
Julio Pablo Comadira

Damages Experts

Santiago Dellepiane
Jose P. Dapena

42. The Parties and the Tribunal exchanged several communications between 11 May and 1 June 2021 concerning the corrections to the transcripts. On 2 June 2021, the Tribunal informed the Parties that it adopted the revisions agreed by the Parties but not the additional ones proposed by the Respondent relating to translation errors. The Tribunal further noted to the Parties that it would rely principally on the original language of argument and testimony in its deliberations.

[Page 12]

III. REQUESTS FOR RELIEF

A. CLAIMANT'S REQUEST FOR RELIEF

43. The Claimant requests the following relief:

(a) a declaration that Argentina breached Article 2(2) of the BIT;

(b) damages for breach of the BIT as set out in Section (D) [of its Reply];

(c) an order that Argentina pay all costs incurred in connection with these arbitral proceedings, including (but not limited to) the costs of the Tribunal, the appointing authority, as well as any legal and other fees, costs and/or expenses incurred by the Claimant, including legal fees, expert fees and costs in respect of the time spent by the Claimant's own employees;

(d) an order that Argentina pay post-Award interest on all sums awarded at the maximum permitted rate until payment in full; and/or

(e) such other relief as the Tribunal may deem appropriate.⁸

B. RESPONDENT'S REQUEST FOR RELIEF

44. The Respondent requests the Tribunal to:

(a) to admit the defences raised by the Argentine Republic;

(b) to dismiss each and all of the claims put forward by Claimant; and

(c) to order Claimant to pay for all costs and expenses arising from these arbitration proceedings.⁹

⁸ Claimant's Reply, para. 209. ↩

⁹ Rejoinder, para. 428. ↩

[Page 13]

IV. RELEVANT LEGAL PROVISIONS

A. THE TREATY

45. The question to be decided in the present phase of the proceedings concerns whether the Respondent has breached Article 2(2) of the Treaty and whether the Claimant is entitled to the damages it seeks. The resolution of this disagreement between the Parties depends on the proper interpretation of Article 2(2) of the Treaty.

46. Article 2 provides as follows:

ARTICLE 2

Promotion and Protection of Investment

(1) Each Contracting Party shall encourage and create favourable conditions for investors of the other Contracting Party to invest capital in its territory, and, subject to its right to exercise powers conferred by its laws, shall admit such capital.

(2) Investments of investors of each Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy protection and constant security in the territory of the other Contracting Party. Neither Contracting Party shall in any way impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory of investors of the other Contracting Party. Each Contracting Party shall observe any obligation it may have entered into with regard to investments of investors of the other Contracting Party.

B. VIENNA CONVENTION ON THE LAW OF TREATIES

47. In addition to the relevant provisions of the Treaty, it is instructive to reproduce here the rules on the interpretation of treaties set forth in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (the “VCLT”), which both Parties acknowledge govern the interpretation of the Treaty:

Article 31

General rule of interpretation

1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:

(a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;

(b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.

3. There shall be taken into account, together with the context:

[Page 14]

(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;

(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;

(c) any relevant rules of international law applicable in the relations between the parties.

4. A special meaning shall be given to a term if it is established that the parties so intended.

Article 32

Supplementary means of interpretation

Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

(a) leaves the meaning ambiguous or obscure; or

(b) leads to a result which is manifestly absurd or unreasonable.

[Page 15]

V. FACTUAL BACKGROUND

48. In the following sections, the factual background discussed by the Parties in their submissions is summarized to provide context for the decision of the Tribunal. Where relevant, it is indicated where the Parties' respective accounts of the facts differ.

A. THE PROGRAMME

49. On 30 May 1997, the President of Argentina issued Decree 477/97 (“Decree 477/97”) approving a programme for the compulsory pre-shipment inspection of goods to be imported into its territory.¹⁰ The Programme had, among others, the objective of reducing or eliminating incorrect or imprecise import declarations, and as a result, detecting and combatting tax avoidance and evasion, unfair competition, and non-compliance with customs regulations.¹¹

50. Pursuant to Decree 477/97, importers of consumer goods, passenger vehicles, and automobiles as well as any other goods determined by MECON were required to follow a procedure for the inspection of such goods prior to shipment.¹² The importing company had to submit a request for inspection to one of the accredited inspection companies under the Programme (the “Inspection Companies").¹³ Thereafter, the Inspection Company would conduct a physical inspection, which would take place in most cases in the country of origin of the goods, and issue a pre-shipment inspection certificate (an “Inspection Certificate”) recording any inconsistencies between the physical inspection and the request for inspection.¹⁴

51. MECON was the enforcement authority for the Programme.¹⁵ MECON was responsible for issuing any clarifying or complementary regulations that were necessary for the proper implementation of the Programme and had the authority to select through a public tender the specialized companies that would undertake any implementing functions under the Programme.¹⁶

52. The Executive Committee for the Programme of Pre-shipment Inspection of Importations (Comité Ejecutivo del Programa de Inspección de Preembarque de Importaciones) (the “Committee")

¹⁰ Decree 477/97, Article 1 (C-6). ↩

¹¹ Decree 477/97, Annex 1, Section (a) (“Objetivos del Programa”) (С-6). ↩

¹² Decree 477/97, Annex 1, Section (g) (C-6). ↩

¹³ Decree 477/97, Annex 1, Section (f)(I)-(II) (C-6). ↩

¹⁴ Decree 477/97, Annex 1, Section (f)(III)-(VIII) (C-6). ↩

¹⁵ Decree 477/97, Article 6 (C-6). ↩

¹⁶ Decree 477/97, Article 6 (C-6). ↩

[Page 16]

was established as the body responsible for supervising the activities related to the Programme.¹⁷ The functions of the Committee included holding a registry of the system of pre-shipment inspection of importations and receiving, controlling and verifying the documentation provided by the Inspection Companies in order to claim payments for their services and coordinate the auditing tasks of the Inspection Companies.¹⁸

53. The Inspection Companies were to be selected by public tender and were bound to verify the compliance of the inspected goods with the regulations and standards specified in Decree 477/97.¹⁹

54. The tasks performed by the Inspection Companies were to be overseen by the National Internal Auditing Commission (Sindicatura General de la Nación) (“SIGEN”), as well as by a private auditing firm (the “Auditor”) to be selected by public tender.²⁰

B. THE TENDER NO. 13/97 AND REGULATIONS RELATED TO THE PROGRAMME

55. On 7 August 1997, a national and international public tender process for the selection of the Auditor was commenced by MECON (“Tender No. 13/97”).²¹ The terms and conditions of Tender No. 13/97 (“Tender Terms and Conditions”) outlined the services to be provided by the Auditor, indicating that the auditing company would “act independently and [would] verify the quantity, quality and customs classification of imported goods, at the point of their final destination for consumption, and will verify the prices" as per the applicable regulations.²² The Tender Terms and Conditions also specified that the “currency of payment” would be Argentine pesos ("Pesos") and that the fees for the auditing services would be paid by the Federal Administration of Public Income (Administration Federal de Ingresos Públicos) (“AFIP”).²³

¹⁷ Decree 477/97, Annex I, Section (i)(I) (C-6). ↩

¹⁸ Decree 477/97, Annex I, Section (i)(I) (C-6). ↩

¹⁹ Decree 477/97, Article 6, Annex I, Section (c)(I) (C-6). ↩

²⁰ Decree 477/97, Article 4 (C-6). ↩

²¹ MECON, Call for Public Tender No. 13/97, 7 August 1997, attaching Terms and Conditions (C-9). ↩

²² MECON, Call for Public Tender No. 13/97, 7 August 1997, attaching Terms and Conditions, Section VIII (C-9). ↩

²³ MECON, Call for Public Tender No. 13/97, 7 August 1997, attaching Terms and Conditions, Sections V-VI (C-9). ↩

[Page 17]

56. On 17 October 1997, MECON approved the Resolution No. 1177/97, identifying the tariff codes of the goods that were subject to the Programme.²⁴

57. On 24 November 1997, the Argentine General Customs Directorate (Dirección General de Aduanas) (“DGA") approved Resolution No. 396/97 setting forth the regulatory and operative provisions applicable to the Programme (“Resolution 396/97”).²⁵ Resolution 396/97 reiterated that importers of consumer goods were required to submit an Inspection Certificate.²⁶ Upon arrival to Argentina, the Inspection Certificates were subject to the selection regime in force.²⁷ In this regard, Annex VIII to Resolution 396/97 established that the shipments could be processed by customs within three different channels:

a) green channel: which only required verifying the existence of an Inspection Certificate to release the goods from customs;

b) orange channel: which required a revision of the relevant documentation, that could lead to the release of the goods—if approved—or to a physical inspection; and

c) red channel: which required a verification of the relevant documents and a physical inspection of the goods.²⁸

58. If, following a physical inspection, the customs agency verified that there were inconsistencies between the inspected goods and the Inspection Certificates that exceeded a given threshold, such inconsistencies would be reported to the Committee.²⁹ In such circumstances, the Committee would process the relevant merchandise pursuant to the applicable regulations.³⁰ Annex VIII

²⁴ DGA Resolution No. 396/97, published in the Official Journal No. 28783, Section 1, 27 November 1997, Annex V (R-18). ↩

²⁵ DGA Resolution No. 396/97, published in the Official Journal No. 28783, Section 1, 27 November 1997 (R-18). ↩

²⁶ DGA Resolution No. 396/97, published in the Official Journal No. 28783, Section 1, 27 November 1997, Annex II, Section I (R-18). ↩

²⁷ DGA Resolution No. 396/97, published in the Official Journal No. 28783, Section 1, 27 November 1997, Annex III, Sections 3.1, 4.1 (R-18). ↩

²⁸ DGA Resolution No. 396/97, published in the Official Journal No. 28783, Section 1, 27 November 1997, Annex VIII (R-18). ↩

²⁹ DGA Resolution No. 396/97, published in the Official Journal No. 28783, Section 1, 27 November 1997, Annex VIII (R-18). ↩

³⁰ DGA Resolution No. 396/97, published in the Official Journal No. 28783, Section 1, 27 November 1997, Annex VIII (R-18). ↩

[Page 18]

further established that all the Inspections Certificates that recorded inconsistencies would be processed through the red channel.³¹

59. On 18 February 1998, the Claimant was declared the successful bidder of Tender No. 13/97.³²

C. THE CONTRACT

60. Thereafter, on 11 March 1998, the Claimant and MECON concluded the Contract, under which the Claimant agreed to oversee, together with SIGEN, the work performed by the Inspection Companies.³³ The Contract stipulated that the following documents formed an integral part of the Contract:

a) Decree 477/97;

b) the Tender Terms and Conditions;

c) Technical Committee Notices Nos. 5 and 6;

d) the offers consisting of "Legal Documents, Background and Technical Proposal" and "Price Proposal"; and

e) the letter submitted by the Claimant, dated 3 October 1997, clarifying the price proposal.³⁴

61. The Contract had an initial term of two years, renewable for an additional year.³⁵

62. Under the Contract, the Claimant agreed to audit shipments of goods covered by the Programme by conducting physical inspections at the point of destination, as well as to verify the quantity, quality, tariff classification, and price of the relevant goods as per the applicable valuation rules.³⁶ In particular, the Contract described the Claimant's audit obligations as follows:

CLAUSE ONE: PURPOSE OF THE CONTRACT – The “AUDITOR” undertakes, jointly with the NATIONAL SUPERVISORY AUTHORITY, to audit the pre-shipment inspection

³¹ DGA Resolution No. 396/97, published in the Official Journal No. 28783, Section 1, 27 November 1997, Annex VIII (R-18). ↩

³² MECON, Resolution No. 218/1998, 18 February 1998 (C-11). ↩

³³ Contract (C-2). ↩

³⁴ Contract, Clause 2 (C-2). ↩

³⁵ Contract, Clause 4 (C-2). ↩

³⁶ Contract, Clauses 6-8 (C-2). ↩

[Page 19]

of imports companies, in accordance with the terms of the Specification Sheet and their Bid, which was awarded by MEyOySP Resolution No. 218/98 issued in Public National and International Tender No. 13/97, entered in the Dossier of the Register of the Ministry of Economy and Public Works and Services No. 090-000423/97 and to deliver the results of such task to the EXECUTIVE COMMITTEE in the form and with the frequency decided upon by the latter. All the information presented by the AUDITOR to the EXECUTIVE COMMITTEE must be duly sealed and signed by its legal representative and the AUDITOR undertakes to furnish all the clarifications and explanations which are requested of it.

[...]

CLAUSE SIX: The AUDITOR shall carry out the inspections at the pertinent Customs, taking care to maintain a suitable ratio according to the operations implemented at each, and in all cases must resolve upon the means required to undertake random controls, as well as to comply with the instruction imparted to it by the EXECUTIVE COMMITTEE of the PRE-SHIPMENT INSPECTION OF IMPORTS PROGRAMME, always ensuring that the values in question do not represent a base that may exceed the maximum fee referred to in clause three.

CLAUSE SEVEN: The AUDITOR shall in all cases verify the quantity, quality, classification and price, according to current appraisal principles.

CLAUSE EIGHT: Notwithstanding the specific instructions imparted in certain cases by the EXECUTIVE COMMITTEE, whether to audit specific operations or comply with certain conditions, the AUDITOR shall endeavour to ensure that the dispatches to be audited are determined prior to the arrival of the merchandise, by random means, to be fixed according to the criteria of the EXECUTIVE COMMITTEE and drawn up on the grounds of the reports furnished to it by the inspection companies and by the GENERAL CUSTOMS DEPARTMENT subordinate to the [AFIP], and must make the verification at the point of destination, except in those cases when for duly justified reasons it must be carried out at the place of origin, in which case prior approval by the EXECUTIVE COMMITTEE is required.³⁷

63. In addition, the Claimant was also required to (i) maintain a database of independently assessed Cost, Insurance, and Freight (“CIF”) values for the relevant goods;³⁸ (ii) provide the Committee with monthly reports of its audit operations;³⁹ (iii) report on any defects observed and propose changes to the Programme;⁴⁰ (iv) develop a manual of auditing procedures; (v) abide by any other instruction given by or submit any other reports requested by the Committee;⁴¹ and (vi) cooperate with SIGEN as necessary in order to comply with Decree 477/97.⁴² In particular, the Contract described these obligations as follows:

CLAUSE NINE: Without prejudice to the statements contained in the preceding clauses, the AUDITOR shall in all cases honour the instructions imparted to it by the EXECUTIVE COMMITTEE, presenting those reports requested as well as cooperate with the NATIONAL

³⁷ Contract, Clauses 1, 6-8 (C-2). ↩

³⁸ Contract, Clause 10 (C-2). ↩

³⁹ Contract, Clause 11 (C-2). ↩

⁴⁰ Contract, Clauses 13, 15 (C-2). ↩

⁴¹ Contract, Clause 9 (C-2). ↩

⁴² Contract, Clause 9 (C-2). ↩

[Page 20]

SUPERVISORY AUTHORITY in all matters required in order to fulfil the obligation imposed by Decree No. 477/97.

CLAUSE TEN: The AUDITOR shall establish its own CIF values, duly breaking down the cost, freight and insurance, and shall maintain an updated database thereof, for the purpose of the comparisons that may be necessary.

CLAUSE ELEVEN: The AUDITOR shall deliver a monthly report to the EXECUTIVE COMMITTEE, within the TEN (10) calendar days following the close of the calendar month, summarizing the details of the audited operations, comparing its data with those in the possession of the inspection companies and of the customs service, estimating, when pertinent, the incidence on collections ensuing from those differences that have been detected.

CLAUSE TWELVE: The AUDITOR shall, upon request by the EXECUTIVE COMMITTEE, analyse the discrepancies between the verifications made by the GENERAL CUSTOMS DEPARTMENT, subordinate to the [AFIP] and those carried out by the inspection companies, giving the EXECUTIVE COMMITTEE its opinion on the subject.

CLAUSE THIRTEEN: The AUDITOR shall inform the EXECUTIVE COMMITTEE concerning any defect it comes across upon performing its duties, both in the mechanics of the PRE-SHIPMENT INSPECTION OF IMPORTS PROGRAMME, as well as in the conduct of the inspection companies and the GENERAL CUSTOMS DEPARTMENT, subordinate to the [AFIP] and shall likewise make the analyses and draw up the report thereon requested by the EXECUTIVE COMMITTEE, for which purpose it shall request the necessary cooperation from the inspection companies and the GENERAL CUSTOMS DEPARTMENT. Moreover the AUDITOR undertakes, furnishing grounds therefor, to propose changes, deletions and incorporations to the selection criteria established by the EXECUTIVE COMMITTEE as well as changes in methodology and procedures carried out by the inspection companies, aimed at increasing their effectiveness, reliability and transparency.

CLAUSE FOURTEEN: The AUDITOR shall present to the EXECUTIVE COMMITTEE for its approval a manual of procedures dealing with the differing aspects referred to by this contract.

CLAUSE FIFTEEN: The AUDITOR shall analyse the information to which it has access, for the purpose of identifying any flaw in the Pre-Shipment Inspection of Imports Programme and propose the necessary corrective measures to the EXECUTIVE COMMITTEE.

64. For its part, MECON was to pay the Claimant 0.64% of the FOB, FOR, or FOT value of each audited Inspection Certificate. At the same time, the Contract provided that the Claimant's fees for each quarter could not exceed 10% of the amount invoiced by the Inspection Companies (the "10% Fee Cap"), for which purpose a selection system would have to be implemented to identify which shipments to audit. In particular, Clause 3 of the Contract provided as follows:

“THE AUDITOR” undertakes to perform this contract fully in accordance with its quotation included in its Bid in Envelope No. 2 and the clarification concerning the latter, that is, for the sum consisting of ZERO POINT SIXTY FOUR PERCENT (0.64%) of the FOB, FOR or FOT value declared on each inspection certification of audited merchandise. In no case shall the fee to be received by the AUDITOR surpass, during the respective quarter, TEN PERCENT (10%) of the amount invoiced by the inspection companies nor may it be under FOUR PERCENT (4%) thereof, for which purpose, the selection systems to be implemented to identify the shipments to be audited, must take these facts into account.⁴³

⁴³ Contract, Clause 3 (C-2). ↩

[Page 21]

65. The fee of 0.64% of the FOB, FOR or FOT value declared on the Inspection Certificates followed from Decree 477/97 and the Tender Terms and Conditions, which stipulated that the Auditor's fee would be 80% of the Inspection Companies' fees:

The price quoted by the bidder shall be a fixed percentage not exceeding EIGHTY PERCENT (80%) of the value of the inspection services established in section g) paragraph II) subparagraph 1) above.⁴⁴

66. In turn, Annex I, Section (g)(II)(1) of Decree 477/97 and the Tender Terms and Conditions had stipulated that the Inspection Companies' fees were to be calculated as follows:

ZERO POINT EIGHT PER CENT (0.8%) of the FOB, FOR or FOT value declared on each inspection certificate of merchandise of the IMPORT PRE-SHIPMENT INSPECTION PROGRAMME.

The minimum fee to be charged for each transaction shall be TWO HUNDRED FIFTY UNITED STATES DOLLARS (U$S 250).

Fee amounts shall be paid on a monthly basis by [AFIP] pursuant to the procedure and requirements to be established by the Authority of Application.⁴⁵

67. The Claimant's fees were to be paid by AFIP as follows:

Payments shall be made monthly in pesos, by the General Administration Bureau of the [AFIP], within THIRTY (30) days following the date the respective invoices are presented, duly approved in accordance with Point c), paragraph VII) of the Specification Sheet. The AUDITOR shall present the invoices pertaining to the duties performed throughout one calendar month, jointly with a summary of the audit reports that have been drawn up, within TEN (10) days of the following month in the form and conditions established by the EXECUTIVE COMMITTEE. Failure to pay at the due time and in the due form shall cause the STATE to be in default, without the need for any demand whatsoever.⁴⁶

68. Finally, the Contract provided that the Claimant's entitlements were strictly limited to those set forth in the Contract:

The AUDITOR assumes exclusive responsibility for the services that comprise the object of this contract and it shall render them without any kind of employment relationship with the MINISTRY, and it shall not be entitled to receive any benefit, payment, subsidy, compensation or right which is not expressly stipulated or provided for in this contract.⁴⁷

⁴⁴ Decree 477/97, Annex III, Section (c)(XI) (C-6) (translation by the Tribunal). ↩

⁴⁵ Decree 477/97, Annex I, Section (g)(II)(1) (C-6) (translation by the Tribunal on the basis of the Respondent's Closing, Slide 5). ↩

⁴⁶ Contract, Clause 19 (C-2). ↩

⁴⁷ Contract, Clause 21 (C-2). ↩

[Page 22]

D. AMENDMENT OF THE AUDITOR'S FEES AND THE SCOPE OF THE PROGRAMME

69. On 9 September 1998, MECON approved Resolution No. 1106/98 (“Resolution 1106/98"), through which it again set the Claimant's fees at “EIGHTY PERCENT (80%) of the fees received by the Inspection companies for each audited Inspection certificate”, and modified the Inspection Companies' fees as follows:

In consideration for their services, inspection companies shall receive ZERO POINT NINE FIVE PER CENT (0.95%) of the FOB, FOR or FOT value declared on each inspection certificate of goods covered by the PRE-SHIPMENT INSPECTION OF IMPORTS PROGRAMME.

The minimum fee to be charged for each transaction shall be ONE HUNDRED TWENTY UNITED STATES DOLLARS (U$S 120).

The resulting amounts shall be paid on a monthly basis by the [AFIP] pursuant to the procedure and requirements to be established by the Authority of Application.⁴⁸

70. As a result, the Claimant's fees were in effect increased to 0.76% of the FOB, FOR, or FOT value declared on each audited Inspection Certificate. In addition, Resolution 1106/98 established the process to be followed for amounts that could not be correlated with the Inspection Certificates, providing as follows:

When, owing to the nature of the tasks, the amount payable cannot be correlated to certificates of inspection, the audit firm shall draw up a report detailing the costs and fees following normal market practice, which shall be subject to the approval of the [Committee].⁴⁹

71. Between March 2000 and September 2001, AFIP issued six resolutions through which a number of goods were excluded from the scope of the Programme (the “2000-2001 Resolutions").⁵⁰

⁴⁸ Resolution 1106/98, Articles 1(j), 2 (C-8) (translation by the Tribunal on the basis of the Respondent's Closing, Slide 6). ↩

⁴⁹ Resolution 1106/98, Article 2 (C-8) (translation by the Respondent). ↩

⁵⁰ AFIP Resolution No. 792/00 "Exclusion of goods from the Pre-Shipment Inspection Certificate Programme", 3 March 2000 (C-14); AFIP Resolution No. 822/00 “Exclusion of tariff items from the Pre-Shipment Inspection Certificate Programme", 31 March 2000 (C-15); AFIP Resolution No. 840/00 "Exclusion of tariff items from the Pre-Shipment Inspection Certificate Programme", 10 May 2000 (C-16); AFIP Resolution No. 910/00 “Exclusion of tariff items from the Pre-Shipment Inspection Certificate Programme", 19 October 2000 (C-17), AFIP Resolution No. 955/01 “Exclusion of tariff items from the Pre-Shipment Inspection Certificate Programme", 11 January 2001 (C-18); AFIP Resolution No. 1099/01 "Exclusion of tariff items from the Pre-Shipment Inspection Certificate Programme”, 24 September 2001 (C-19). ↩

[Page 23]

E. EVENTS RELATED TO THE PERFORMANCE OF THE CONTRACT

1. Services performed by ICS

(a) Auditing Services

72. Throughout the duration of the Programme the Claimant audited the work performed by Inspection Companies by conducting physical inspections at the point of destination of certain shipments that were covered by the Programme and verifying the quantity, quality, tariff classification, and price of the relevant goods as per the applicable valuation rules.⁵¹

73. The selection of the shipments that were to be audited by the Claimant was determined by the Committee through the “Red Channel Audit system”.⁵² Under this system, the operations to be audited by the Claimant were selected by the Committee among the shipments processed by the DGA through the “red channel” in accordance with Resolution 396/97.⁵³

74. As elaborated upon below, the Parties dispute whether an adequate system for selecting the shipments to be audited by the Claimant was put in place by the Respondent.⁵⁴ The Claimant argues that the "Red Channel Audit system” failed to work in practice.⁵⁵ The Claimant asserts that it notified these practical issues to the Respondent.⁵⁶ For instance, the Claimant notes that in a number of communications, between July 1998 and May 1999, it pointed out that the customs authorities generally failed to notify the Claimant that an inspection was needed before the goods had been released from customs.⁵⁷ The Claimant avers that, in the same communications, it noted that some customs offices indicated that their systems lacked any notifications regarding the

⁵¹ Statement of Claim, paras. 54-56; Statement of Defence, paras. 47-69; Hearing Tr., Day 1 (6 April 2021), 9:19-10:2; Committee Certification No. IPE 164/04, 22 July 2004 (C-98). The Contract was in force for an initial period of 2 years (i.e., until March 2000), and extended on 2 March 2001 for an additional year (i.e., from March 2000 to March 2001) (Decision of the Committee No. 002, 2 March 2001, Article 1 (C-20)). Following the conclusion of the extended term of the Contract, the Claimant continued to provide auditing services until the termination of the Programme in November 2001 (Statement of Claim, para. 52; Statement of Defence, para. 12). ↩

⁵² Statement of Claim, para. 64; Statement of Defence, para. 95. ↩

⁵³ Statement of Claim, para. 64; Statement of Defence, para. 103. ↩

⁵⁴ See e.g. Statement of Claim, paras. 63-65; Statement of Defence, para. 103. ↩

⁵⁵ Statement of Claim, paras. 63-65. ↩

⁵⁶ Statement of Claim, para. 64. ↩

⁵⁷ Statement of Claim, para. 64; Fax from ICS to the Committee, 2 July 1998 (C-24); Letter from ICS to the Committee, 24 August 1998 (C-25); Letter from ICS to the Committee, 4 September 1998 (C-26); Letter from ICS to the Committee, 8 October 1998 (C-27); Report conducted at terminals 1 and 2, 4 February 1999 (C-28); Hearing Tr., Day 1 (6 April 2021), 55:10-56:10. ↩

[Page 24]

shipments that need to be audited by the Claimant.⁵⁸ Moreover, the Claimant argues that the Respondent acknowledged these practical shortcomings when it instructed the Claimant to "install itself physically at the points of destination and to try to take as many dispatches as it can, [even if] this is not the ideal solution".⁵⁹

75. On the other hand, the Respondent asserts that it appropriately established selection criteria that enabled the Claimant to carry out its duties, as the Claimant recognized in its monthly reports.⁶⁰

(b) Alleged Special Services

76. Between June 1998 and July 2001, the Claimant submitted reports and letters to the Committee in relation to 21 tasks (“Special Services”).⁶¹ The reports and letters comprised:

a) “Banana Imports into Argentina”,⁶² June 1998: verifying whether the FOB price published in a statistical bulletin could be deemed valid in comparison to the average prices of that same product in Ecuador, Brazil, and Argentina;⁶³

b) "Analysis of Deficiencies Detected in the Issue of the CIPI”, June – July 1998: verifying the compliance of a sample of Inspection Certificates with Resolution No. 1278 dated 7 November 1997 and the Committee's Provisions Nos. 4 and 8. The former resolution contained rules related to the determination of the country of origin of imported goods, and the latter provisions established the Inspection Companies' obligation to identify the imported merchandises that were not stored in a container or that were stored in an unsealed container;⁶⁴

⁵⁸ Statement of Claim, para. 64; Letter from ICS to the Committee, 16 April 1999 (C-29); Letter from ICS to the Committee, 6 May 1999 (C-30). ↩

⁵⁹ Statement of Claim, para. 65; Letter from the Committee to AFIP, 6 August 1999 (C-32) (translation by the Claimant); Hearing Tr., Day 1 (6 April 2021), 56:11-57:1. ↩

⁶⁰ Rejoinder, para. 61. ↩

⁶¹ Statement of Claim, paras. 72-74. ↩

⁶² For ease of reference, the titles of the alleged special services have been included as referred to by the Parties regardless of the actual title contained in the respective exhibit (See e.g. Statement of Claim, para. 73; Statement of Defence, para. 185). The title of each document as reflected in the respective exhibit is indicated in the footnotes. ↩

⁶³ Report on Banana Imports into Argentina, Ref. No. ICS C/99/17141/ARG, 1 September 1999, p. 255 (C-122). ↩

⁶⁴ Report on the Deficiencies Detected in the Issuance of Inspection Certificates, 6 July 1999, pp. 123-124 (C-123). ↩

[Page 25]

c) "Special Audit Report – Asia Imports”, June – August 1998: establishing the impact of the devaluation of currencies of countries in South East Asia upon the imports into Argentina and verifying in particular whether the Inspection Certificates of imports shipped from that region contained inconsistencies in prices and associated values;⁶⁵

d) Special Report on “Committee Certificates”, June – October 1998: presenting statistics and comments regarding the number of Inspection Certificates submitted in April 1999 that were not included in the Committee's database;⁶⁶

e) “Kodak Study”, July – August 1998: verifying the value of imports of electronic goods corresponding to the tariff code No. 370254190 (photographic film in rolls, sensitised, unexposed, of any material other than paper, paperboard, or textiles instant print film in rolls, sensitised, unexposed);⁶⁷

f) “TDK Line Study”, August – October 1998: reviewing a sample of the Inspection Certificates with the purpose of verifying the prices of products of the brand TDK and Samsung;⁶⁸

g) “Chicken Imports Report SADIA S.A.”, August 1998: presenting the outcome of an audit of the quality, quantity, tariff classification, and customs value of selected Inspection Certificates presented by SADIA ARG. S.A. (an importer) at the customs station of Bernardo de Yrigoyen;⁶⁹

h) “Glass and Glassware Study”, 18 August 1998: analysing the operations of Soifer Hnos. S.A.I.C. (an importer) under the Programme;⁷⁰

i) "Marble and Granite San Luis S.A.”, 29 October 1998: auditing an Inspection Certificate submitted by the importer Mármoles y Granitos San Luis S.A.;⁷¹

⁶⁵ Special Audit Report concerning Importations from Asia, pp. 3-4 (C-124). ↩

⁶⁶ Special Report on the Inspection Certificates not found in the Database of the Committee, 18 May 1999, p. 91 (C-125). ↩

⁶⁷ Study Regarding Kodak Products, July – August 1998, p. 245 (C-126). ↩

⁶⁸ Special Report on the tariff codes No. 8523.11.10; 8523.13.20 and 8523.90.00, 18 May 1999, p. 1 (C-127). ↩

⁶⁹ Report on Chicken Imports SADIA S.A., 11 February 1999, p. 4 (C-128). ↩

⁷⁰ Letter from the Claimant to the Committee on the Importations of Soifer Hnos. S.A.I.C (referred to by the Claimant as Glass and Glassware Study), 18 August 1998, p. 1 (С-129). ↩

⁷¹ Letter from the Claimant to the Committee on Mármoles y Granitos San Luis S.A., 29 October 1998, p. 1 (C-130). ↩

[Page 26]

j) "Temporary Imports Study”, November 1998 – February 1999: analysing the importations carried out under the Temporary Suspensive Import Destination Regime, between 1 February 1998 and 31 January 1999;⁷²

k) "Report on Iquique (Chile), Colonia and Montevideo, Uruguay Free Zone”, November 1998 – February 1999: comprising two reports, one on the business processes applicable to importations from Iquique (Chile) and a second report on the business processes applicable to the importation of vehicles from the Colonia and Montevideo (Uruguay) free zones in 1999;⁷³

l) “Brazil Imports, October - December 1998 and January 1999”, January – February 1999: analysing import trends from Brazil of goods covered by the Programme from December 1998 to January 1999;⁷⁴

m) “Imports Chapter 30, October - December 1998 and January 1999”, January – February 1999: analysing the importation of goods from Brazil under Chapter 30 of the Mercosur Common Nomenclature (Pharmaceutical Products) between October – December 1998 and January 1999;⁷⁵

n) “Kiwi Imports Study”, June 1999: analysing the market for the trade of kiwi in Chile and an approximation of such market in Argentina, Italy, and Australia;⁷⁶

o) “Colonia Uruguay Free Zone Report”, July 1999: evaluating the administrative and operational headquarters of the Inspection Companies in Uruguay;⁷⁷

p) "Report regarding Compliance with CEPIPI Article 2, provision No. 4”, September 1999 – February 2000: assessing the Inspection Companies' compliance with Article 2 of Committee Provision No. 4, which required the identification of imported goods that were not stored in a container or that were stored in an unsealed container;⁷⁸

⁷² Temporary Imports Study, 17 February 1999, p. 2 (C-131). ↩

⁷³ Report on Iquique, Colonia and Montevideo Free Trade Zones, pp. 2, 11 (R-137). ↩

⁷⁴ Report on Imports from Brazil from December 1998 to January 1999, p. 7 (C-132). ↩

⁷⁵ Report on Imports Chapter 30 from Brazil from December 1998 to February 1999, pp. 7-8 (C-133). ↩

⁷⁶ Kiwi Imports Study, p. 4 (C-134). ↩

⁷⁷ Colonia Uruguay Free Zone Report, 20 May 1999 (C-135) ↩

⁷⁸ Report regarding Compliance with Article 2, Provision No. 4 of the Committee, p. 4 (R-101). ↩

[Page 27]

q) “Analysis of Imports among Related Companies”, November 1999 – January 2000: analysing operations involving related importers and exporters;⁷⁹

r) "Item 8703 Imports Investigation”, November 1999 – February 2000: statistics on imports of tariff item 8703 (automobiles);⁸⁰

s) "Iquique 2 Report”, January 2001 – April 2001: exhaustively auditing the certificates issued by the Inspection Companies for operations carried out during 2000-2001 from the Iquique (Chile) free trade zone in order to determine if there were tax losses and the amount thereof;⁸¹

t) “Satellite Antenna Report”, 24 January 2001: analysing the values of five certificates issued by Surveyseed for importations by Galaxy Entertainment de Argentina;⁸²

u) "Rito Kosher Milk Report”, 20 July 2001: verifying the price of Kosher Milk declared by the importer Mutual Kashrut Com.⁸³

77. As elaborated upon below, the Parties dispute the characterization and the fees that should be derived from the issuance of the above-listed reports.⁸⁴ The Claimant considers that the reports constituted "special services” to be compensated at a market rate pursuant to Resolution 1106/98. For the Respondent, these services “were nothing more than tasks that ICS had to carry out as part of the provision of its auditing services and, as such, they were already duly paid for through the relevant payment of the monthly invoices".⁸⁵ In addition, the Respondent questions the probative value of these reports given that none of them are signed by the Committee.⁸⁶

⁷⁹ Analysis of Imports among Related Companies, November 1999 – January 2000, p. 4 (C-136). ↩

⁸⁰ Statistics on Imports of Tariff Item 8703 (automobiles) (C-137). ↩

⁸¹ Special Audit Report Concerning the Free Trade Zone of Iquique, 2001, p. 4 (C-138). ↩

⁸² Letter from the Claimant to the Committee_on the Values Certified by Surveyseed (Satellite Antenna Report), 24 January 2001, p. 1 (C-139). ↩

⁸³ Letter from the Claimant to the Committee on the Price of Kosher Milk, 20 July 2001 (C-140). ↩

⁸⁴ Statement of Claim, paras. 72-74; Statement of Defence, paras. 184-186. ↩

⁸⁵ Rejoinder, para. 8. ↩

⁸⁶ Hearing Tr., Day 7 (14 April 2021), 1122:17-20. ↩

[Page 28]

2. Payment of the services performed by ICS

78. In accordance with Clause 3 of the Contract, the Claimant submitted invoices on a monthly basis for the services it performed under the Contract.⁸⁷ Whereas during the original and extended term of the Contract—i.e., from March 1998 to March 2001—the Claimant issued invoices denominated in Pesos, as of the expiration of the contract the Claimant submitted invoices denominated in U.S. dollars.⁸⁸

79. The Parties dispute whether the invoices submitted by the Claimant complied during the entire duration of the Programme with the 10% Fee Cap provided for in Clause 3 of the Contract. The Claimant indicates that, at the outset of the Programme, it submitted invoices that often exceeded the 10% Fee Cap provided for in Clause 3 of the Contract.⁸⁹ According to the Claimant, it would only know whether it had exceeded the cap at the end of each quarter when the Respondent would request the Claimant to cancel the original invoices and re-issue new invoices for a lower amount that fell within the cap.⁹⁰ The Claimant alleges that the reissuance of invoices resulted in excess tax liabilities due to the impossibility under Argentine law to reduce the monthly amount of Value Added Tax originally declared.⁹¹ In view of the delays and inconveniences caused by the described payment procedure, the Claimant says that it eventually decided to only issue invoices once the Respondent indicated the amount that should be billed.⁹²

80. The Respondent argues that, while the Contract was in force, the Claimant's invoices complied with the 10% Fee Cap.⁹³ However, following the termination of the Programme, the Claimant started issuing invoices that exceeded the 10% Fee Cap.⁹⁴

81. According to the Respondent, the total amount paid by the Respondent for the auditing services rendered by the Claimant over the course of the Programme amounts to ARS 19,434,124.⁹⁵ The Respondent asserts that after the Contract expired (i.e., from March 2001 until November 2001),

⁸⁷ Statement of Claim, para. 57; Statement of Defence, paras.65-66. ↩

⁸⁸ Reply, para. 41; Statement of Defence, paras. 66-69. ↩

⁸⁹ Statement of Claim, para. 59. ↩

⁹⁰ Statement of Claim, para. 59. ↩

⁹¹ Statement of Claim, para. 60; First Santamaria Statement, para. 25; Law 11.683, as amended by Decree 821/98, Article 13 (C-23). ↩

⁹² Statement of Claim, para. 61; First Santamaria Statement, paras. 25-26. ↩

⁹³ Statement of Defence, para. 68; Invoices and Credit/Debit Notes (R-25). ↩

⁹⁴ Statement of Defence, para. 68; Invoices and Credit/Debit Notes (R-25). ↩

⁹⁵ Rejoinder, paras. 44-46; First Dapena Report, paras. 43-45; Second Dapena Report, Section II.A.1.c. ↩

[Page 29]

in the absence of a valid contract to justify the payments, AFIP decided to settle the payment of the Claimant's invoices as “equitable payments” on the basis of an unjust enrichment approach.⁹⁶ The following table, produced by the Respondent, sets out the payments made to the Claimant:⁹⁷

Summary:

F. ECONOMIC CRISIS IN ARGENTINA

82. In 2001-2002, Argentina experienced an economic and political crisis that has been described as among the deepest recessions in its history.⁹⁸ This crisis took place following three years of deep

⁹⁶ Statement of Defence, para. 61; First Acosta Witness Statement, paras. 29-30. ↩

⁹⁷ Rejoinder, para. 45. ↩

⁹⁸ Carlos G. Fernández Valdovinos, "Growth, Poverty, and Social Equity in Argentina", World Bank Newsletter, November 2005, No. 82, p. 2 (R-55); BBC News – Max Seitz, "The day Argentina hit rock bottom," 19 December 2005 (R-45). ↩

[Page 30]

recession and an associated rise in the unemployment rate,⁹⁹ and saw a 20% drop in the gross domestic product from 1999 to 2002.¹⁰⁰

83. From December 1999 onwards, a number of measures were undertaken by the Argentine government to cope with the recession, including securing international financial support, enacting drastic cuts in public spending, and issuing sovereign debt.¹⁰¹ Such measures were implemented in the context of a convertibility regime pursuant to which the Argentine Peso was pegged to the U.S. dollar at a foreign exchange rate of one to one (1:1).¹⁰²

84. On 24 August 2001, the President of Argentina issued Decree No. 1060/2001 (“Decree 1060/2001").¹⁰³ Pursuant to Decree 1060/2001, public bodies and entities were ordered to request from suppliers a 13% reduction in the amounts payable for goods or services procured.¹⁰⁴ In the event that the service provider's consent was not given within ten days from their notification, the respective administrative body could either: (i) terminate the contract, provided that the service in question was not essential for general public interest;¹⁰⁵ or (ii) reduce

⁹⁹ Saúl Keifman, “Auge y derrumbe de la convertibilidad Argentina: lecciones para Ecuador", Iconos, No. 19, Flacso-Ecuador, May 2004, p. 28 (R-58); INDEC, Evolution of activity, employment, unemployment and underemployment rates from 1974 onwards, available at https://www.indec.gob.ar/ftp/cuadros/menusuperior/archivo/shempleo1.xls (R-61); Clarín, “De la Rúa renunció, cercado por la crisis y sin respaldo político,” 21 December 2001, p. 5 (R-49). ↩

¹⁰⁰ Carlos G. Fernández Valdovinos, "Growth, Poverty, and Social Equity in Argentina", World Bank Newsletter, November 2005, No. 82, p. 2 (R-55) ↩

¹⁰¹ Presidential Decree No. 648/01, 16 May 2001 (R-69); Paul Blustein, "And the Money Kept Rolling In (And Out): Wall Street, The IMF, and The Bankrupting of Argentina”, 2005, p. 9-19, 21 (R-54); Saúl Keifman, "Auge y derrumbe de la convertibilidad Argentina: lecciones para Ecuador", Iconos, No. 19, Flacso-Ecuador, May 2004, p. 28 (R-58); Clarín, “Alianza acelera dura reforma impositiva,” 5 November 1999 (R-64); Clarín, “De la Rúa anuncia hoy blindaje financiero," 18 December 2000 (R-65); Ámbito Financiero, “Blindaje, Megacanje y Corralito: las medidas me marcaron el fin de la Rúa,” 9 July 2019 (R-66); La Prensa, “Severo plan de ajuste de López Murphy," 17 March 2001 (R-67); La Nación, “El Megancanje es por 29.477 millones," 4 June 2001 (R-70); Fernando Krakowiak, “Trece cuasimonedas circulan por el territorio nacional,” 26 May 2002, p. 12 (R-134); Presidential Decree No 1004/01, 9 August 2001 (R-77); El País, “La Ley de Déficit Cero impone drásticos recortes en el gasto público en Argentina,” 31 July 2001 (R-79); Clarín, “Fijaron por decreto la poda para sueldos y jubilaciones," 24 July 2001 (R-80); Decree 1060/2001 (C-50). ↩

¹⁰² Saúl Keifman, “Auge y derrumbe de la convertibilidad Argentina: lecciones para Ecuador", Iconos, No. 19, Flacso-Ecuador, May 2004, pp. 27-28 (R-58). The Convertibility Law No. 23.928 passed by the Argentine Congress on 27 March 1991, set the foreign exchange rate between the Austral to the U.S. dollar at 10.000 Australes for 1 U.S. dollar (Convertibility Law No. 23.928, 27 March 1991, Article 1 (C-37)). Later on 17 October 1991 when the Peso was adopted as the national currency in Argentina and its value was set at 1 Peso for 10,000 Australes, the Peso was pegged to the U.S. dollar at a foreign exchange rate of one to one 1:1 (Presidential Decree 2128/91, 17 October 1991, Art. 1 (C-38)). ↩

¹⁰³ Decree 1060/2001 (C-50). ↩

¹⁰⁴ Decree 1060/2001, Articles 1, 4 (C-50). ↩

¹⁰⁵ Decree 1060/2001, Article 1(2)(a) (C-50). ↩

[Page 31]

the level of services being provided in order to reduce the level of fees accordingly, if the service in question was essential for general public interest.¹⁰⁶

85. On 1 December 2001, Decree 1570/01 imposed restrictions on the withdrawal of funds from the banking system (known as the “corralito”).¹⁰⁷ This triggered widespread social discontent, including looting and riots during which it was reported that 39 persons died.¹⁰⁸

86. In May 2002, the proportion of the population living below the poverty line had reached 53% and the unemployment rate had risen to 21.5%.¹⁰⁹ Institutional instability ensued: following the resignation of the then President on 20 December 2001 and within a period of less than 15 days, Argentina had a succession of five Presidents, who resigned one after the other.¹¹⁰

G. EMERGENCY LAW AND DECREE 214/02

87. On 6 January 2002, the Argentine Congress enacted Law No. 25.561 (the “Emergency Law"), declaring a temporary state of "emergency” for a period that was due to expire on 10 December 2003.¹¹¹ Among other matters, the Emergency Law authorized the Executive branch of the government to institute a new currency exchange regime in Argentina.¹¹² To this effect, the Emergency Law repealed the currency board established by the Convertibility Law which fixed the foreign exchange rate of one Peso to one U.S. dollar.¹¹³ The end of Peso-U.S. dollar parity led to a devaluation of the Peso against the dollar, with the value of Peso dropping to less than one third of its prior exchange rate.¹¹⁴

¹⁰⁶ Decree 1060/2001, Article 1(2)(b) (C-50). ↩

¹⁰⁷ Presidential Decree No. 1570/01, 1 December 2001 (R-81); Ámbito Financiero, “Blindaje, Megacanje y Corralito: las medidas me marcaron el fin de la Rúa," 9 July 2019 (R-66). ↩

¹⁰⁸ Nodal Cultura, “39, las víctimas del 2001", 8 September 2018 (R-135). ↩

¹⁰⁹ INDEC, Percentage of households and people living below the poverty and indigence lines in urban agglomerates (EPH - Permanent Household Survey) and statistical regions, from May 2001 onwards, available at: https://www.indec.gob.ar/ftp/cuadros/sociedad/sh-pobreza1.xls (R-83); INDEC, Evolution of activity, employment, unemployment and underemployment rates from 1974 onwards, available at: https://www.indec.gob.ar/ftp/cuadros/menusuperior/archivo/shempleo1.xls (R-61). ↩

¹¹⁰ BBCMundo.com, “Las semanas de los cinco presidentes," 31 December 2001 (R-50); Clarín, “De la Rúa renunció, cercado por la crisis y sin respaldo político,” 21 December 2001 (R-49). ↩

¹¹¹ Emergency Law, Article 1 (C-36). ↩

¹¹² Emergency Law, Article 2 (C-36). ↩

¹¹³ Emergency Law, Article 3 (C-36). ↩

¹¹⁴ Paul Blustein, "And the Money Kept Rolling In (And Out): Wall Street, The IMF, and The Bankrupting of Argentina", 2005, p. 19 (R-54). ↩

[Page 32]

88. Under the framework of the Emergency Law, on 4 February 2002, the President of Argentina issued Decree No. 214/02 (“Decree 214/02”).¹¹⁵ Decree 214/02 established that all the obligations denominated in a foreign currency existing as of the time of the enactment of the Emergency Law be converted into Pesos at a rate of one peso to one U.S. dollar.¹¹⁶ Decree 214/02 also established that the obligations converted into Pesos pursuant to its Article 1 were to be adjusted by a stabilization ratio (Coeficiente de Estabilización de Referencia).¹¹⁷

H. THE TERMINATION OF THE PROGRAMME

89. In accordance with MECON's resolution of 2 November 2001 and the Committee's notice of 21 November 2001, the Programme was terminated on 20 February 2002.¹¹⁸ By letter of that same date, the Claimant requested that the Committee approve its outstanding invoices.¹¹⁹

90. On 15 March 2002, the Claimant filed an administrative claim pursuant to Article 30 of the Argentine National Law of Administrative Procedures No. 19.549 (the “LPA”), reiterating its request for the approval and payment of the outstanding invoices identified in its letter of 20 February 2002.¹²⁰ In addition, the Claimant argued that in view of the currency of the values that served as a basis for the calculation of its fees, the legal framework that was in force at the time the Programme was established, and the fact that a major part of its services under the Contract were rendered abroad, its outstanding invoices should be paid in U.S. dollars.¹²¹

91. On 22 August 2002, the Committee returned the Claimant's invoices for the services provided from April to December 2001 alleging that (i) the invoices were not issued in the currency indicated by Annex II of Decree 477/97 and the Contract; (ii) with the only exception of the invoice corresponding to a report concerning the free trade zone of Iquique, the invoices for “special services” did not comply with the requirements established by SIGEN on 4 June 2001;

¹¹⁵ Decree 214/02 (C-39). ↩

¹¹⁶ Decree 214/02, Articles 1, 3 (C-39). ↩

¹¹⁷ Decree 214/02, Article 4 (C-39). ↩

¹¹⁸ Letter from the Committee to ICS, 21 November 2001, enclosing Resolution 650/01, 2 November 2001 (C-21). ↩

¹¹⁹ Letter from ICS to the Committee, 20 February 2002 (C-40). ↩

¹²⁰ Administrative claim filed by the Claimant before the Committee, 15 March 2002, Case No. 252457/02, 15 March 2002, received on 6 June 2002 (C-41). ↩

¹²¹ Administrative Claim filed by the Claimant before the Committee, Case No. 252457/02, 15 March 2002, received on 6 June 2002 (C-41). ↩

[Page 33]

and (iii) the invoices concerning audited inspection certificates did not comply with the 10% Fee Cap and did not correspond to their issuance date.¹²²

92. By letters dated 19 December 2002, the Claimant sent the Committee a new set of invoices for its outstanding fees, re-issued in accordance with the Committee’s observations of 22 August 2002.¹²³ At the same time, the Claimant stated that it reserved its rights in respect of the interest accrued for untimely payment by the Respondent and the reduction in the amount of fees as a result of the conversion of the invoices from U.S. dollars to Pesos.¹²⁴

93. By letter dated 8 October 2002, the Claimant provided certain clarifications regarding the invoices for the “special services”.¹²⁵

94. On 22 April 2003, AFIP informed the Claimant that it made payments corresponding to some of the Claimant’s invoices.¹²⁶

95. By letter dated 30 June 2003, AFIP requested that, pursuant to Decree 1060/2001, the Claimant issue credit notes to the effect of reducing 13% of each invoice issued between July and December 2001.¹²⁷ AFIP further stated that the issuance of these credit notes constituted an indispensable requirement for the payment of further outstanding invoices.¹²⁸

96. On 23 September 2004, the Claimant requested that the Committee inform it of the status of the approval and payment of the invoices related to the “special services”.¹²⁹

97. On 28 September and 6 October 2004, the Committee reiterated its request for a 13% reduction of each invoice pursuant to Decree 1060/2001.¹³⁰

¹²² Letter from the Committee to ICS, 22 August 2002 (C-42). ↩

¹²³ Letters from ICS to the Committee, 19 December 2002 (C-45). ↩

¹²⁴ Letters from ICS to the Committee, 19 December 2002, p. 2 (C-45). ↩

¹²⁵ Letters from ICS to the Committee, 8 October 2003 (C-46). ↩

¹²⁶ Letters from AFIP to ICS, 8 March 2003 and 22 April 2003 (C-48). ↩

¹²⁷ Letter from AFIP to ICS, 30 June 2003 (C-49). ↩

¹²⁸ Letter from AFIP to ICS, 30 June 2003 (C-49). ↩

¹²⁹ Letter from ICS to the Committee, 23 September 2004 (C-47). ↩

¹³⁰ Letter from the Committee to ICS, 28 September 2004 (C-51); Letter from the Committee to ICS, 6 October 2004 (C-52). ↩

[Page 34]

98. On 6 December 2004, the Claimant filed an amended and expanded administrative claim before the Minister of Economy and Production.¹³¹ The Claimant claimed payment of (i) the unpaid invoices for auditing services from April to December 2001 in the amounts and currency in which they were originally issued; (ii) invoices for auditing services prior to April 2001 which exceeded the 10% Fee Cap; (iii) the difference between the amounts paid by AFIP for auditing services carried out from July 2000 to March 2001 pursuant to the invoices reissued in Pesos and the amounts originally invoiced in U.S. dollars; and (iv) the payment of the invoices for “special services”.¹³²

99. On 7 December 2004, the Claimant provided to the Committee the credit notes corresponding to the 13% reduction in the total amount of its outstanding invoices.¹³³

100. On 10 January 2006, MECON issued Resolution No. 325 (“Resolution 325”) approving the payment of the Claimant’s fees corresponding to auditing services provided from April 2001 to December 2001 as per the invoices re-issued in Pesos and the credit notes reflecting a 13% reduction in such invoices.¹³⁴

101. By letters of 24-25 January and 21 February 2006, the Committee observed that there was no proof of approval by the Committee of the “special services”.¹³⁵ Accordingly, it requested the Claimant to submit, pursuant Article 2 of Resolution 1106/98, a report detailing the expenses and fees incurred in relation to each of the “special services” together with supporting documents.¹³⁶ The Claimant provided the relevant documentation between 11 June and 1 August 2006.¹³⁷

¹³¹ Amplified Administrative Claim filed by the Claimant before the Minister of Economy and Production of Argentina, Case No. 252457/02, 6 December 2004, Section V (C-54). ↩

¹³² Amplified Administrative Claim filed by the Claimant before the Minister of Economy and Production of Argentina, Case No. 252457/02, 6 December 2004, Section V (C-54). ↩

¹³³ Letter from ICS to the Committee, 7 December 2004 (C-53). ↩

¹³⁴ MECON, Decision No. 325, 10 January 2006 (C-60). ↩

¹³⁵ Letters from the Committee to ICS, 24 and 25 January, and 21 February 2006 (C-57). ↩

¹³⁶ Letters from the Committee to ICS, 24 and 25 January, and 21 February 2006 (C-57). ↩

¹³⁷ Letters from ICS to the Committee, from 11 June to 1 August 2006 (C-59). ↩

[Page 35]

I. LEGAL PROCEEDINGS

1. Administrative proceedings initiated by the Claimant

102. As noted above, on 15 March 2002,¹³⁸ the Claimant filed an administrative claim, which was subsequently expanded on 6 December 2004.¹³⁹ The Claimant points out that MECON never rendered a decision in respect of its administrative claim and that the respective administrative procedure was terminated when the Claimant submitted the dispute to the competent Argentine court on 17 February 2012.¹⁴⁰

2. The ICS I arbitration

103. On 30 June 2009, the Claimant, ICS commenced arbitration proceedings against the Respondent pursuant to Article 8 of the Treaty and the UNCITRAL Rules (the “ICS I Arbitration”).¹⁴¹ In those proceedings, ICS contended the treatment accorded to it by Argentina in connection with the Contract had breached the Treaty.¹⁴²

104. The tribunal in the ICS I Arbitration issued an award on jurisdiction on 10 February 2012, in which it declined jurisdiction over ICS’s claims due to the Claimant’s failure to comply with the mandatory 18-month litigation prerequisite set forth in Article 8 of the Treaty.¹⁴³ The Tribunal determined that the former decision was “without prejudice to the Claimant’s rights to submit them to arbitration before a new tribunal after complying with Article 8 of the Treaty.”¹⁴⁴

¹³⁸ Administrative claim filed by the Claimant before the Committee, 15 March 2002, Case No. 252457/02 (C-41). ↩

¹³⁹ Amplified Administrative Claim filed by the Claimant before the Minister of Economy and Production of Argentina, Case No. 252457/02, 6 December 2004 (C-54). ↩

¹⁴⁰ Statement of Claim, fn. 91. ↩

¹⁴¹ ICS Inspection and Control Services Limited v. The Republic of Argentina, PCA Case No. 2010-9, Award on Jurisdiction, 10 February 2012, para. 3 (C-65). ↩

¹⁴² ICS Inspection and Control Services Limited v. The Republic of Argentina, PCA Case No. 2010-9, Award on Jurisdiction, 10 February 2012, paras. 1, 4 (C-65). ↩

¹⁴³ ICS Inspection and Control Services Limited v. The Republic of Argentina, PCA Case No. 2010-9, Award on Jurisdiction, 10 February 2012, Section J (C-65). ↩

¹⁴⁴ ICS Inspection and Control Services Limited v. The Republic of Argentina, PCA Case No. 2010-9, Award on Jurisdiction, 10 February 2012, Section J (C-65). ↩

[Page 36]

3. Judicial proceedings initiated by ICS

105. Following the award on jurisdiction in the ICS I Arbitration, the Claimant submitted the dispute to the Argentine administrative courts on 17 February 2012.¹⁴⁵ To date, the proceedings in the Argentine courts remain pending.¹⁴⁶

¹⁴⁵ Argentine court filing by ICS, 17 February 2012 (C-66); Argentine court filing by ICS, 30 July 2012 (C-67). ↩

¹⁴⁶ Statement of Claim, para. 95. ↩

[Page 37]

VI. PRELIMINARY DEFENCES

106. The Respondent raises four preliminary defences to the Claimant’s claims. In particular, the Respondent submits that the Claimant’s claims are precluded, alternatively, by (i) acquiescence and estoppel; (ii) good faith; and (iii) extinctive prescription.¹⁴⁷

A. THE RESPONDENT'S POSITION

1. Acquiescence and estoppel

107. The Respondent submits that, under international law, the concepts of acquiescence and estoppel “prevent a claimant from bringing a claim if it may be inferred from its previous actions that it has consented to the acts on which its claim is based”, because “under the given circumstances, some sort of action was expected to be taken” if it had any objection.¹⁴⁸ Estoppel, the Respondent adds, is a general principle of law rooted in the principle of good faith, “preventing a party from acting in a way that is contrary to its own previous actions where such change of mind would cause serious injustice to the other party.”¹⁴⁹

108. With respect to the 10% Fee Cap, the Respondent submits that the Claimant complied with the 10% Fee Cap throughout the Programme, but then submitted for the first time in January 2002 invoices that exceeded the 10% Fee Cap along with belated objections.¹⁵⁰ According to the Respondent, the Claimant provided its tacit consent to the application of the 10% Fee Cap by issuing invoices and accepting payments within that limit.¹⁵¹ The Respondent underscores that

¹⁴⁷ Statement of Defence, Section IV; Rejoinder, Section IV. ↩

¹⁴⁸ Statement of Defence, paras. 312-317; Rejoinder, paras. 195-196; I.V. MacGibbon, “Estoppel in International Law”, International and Comparative Law Quarterly, 1958, vol. 7, p. 501 (RLA-147); Christian J. Tams, “Waiver, Acquiescence, and Extinctive Prescription”, in The Law of International Responsibility, James Crawford J, Pellet A, and Olleson, S (eds.), 2010, pp. 1042-1044 (RLA-68); M.C.I. Power Group L.V. and New Turbine, Inv. v. Ecuador, ICSID Case No. ARB/03/6, Award, 31 July 2007, para. 302 (RLA-143); Ronald S. Lauder v. Czech Republic, 3 September 2002, paras. 270, 273 (RLA-144); Canfor Corporation v. United States of America; Tembec et al. v. United States of America; and Terminal Forest Products Ltd. v. United States of America, Order of the Consolidation Tribunal, 7 September 2005, para. 168 (RLA-145); Hearing Tr., Day 1 (6 April 2021), 105:1-8; Case concerning the Temple of Preah Vihear (Cambodia v. Thailand), Merits, Judgment, 15 June 1962: I.C. J. Reports 1962, p. 6 (CLA-194). ↩

¹⁴⁹ Statement of Defence, para. 316; Rejoinder, para. 201; Canfor Corporation v. United States of America; Tembec et al. v. United States of America; and Terminal Forest Products Ltd. v. United States of America, Order of the Consolidation Tribunal, 7 September 2005, para. 168 (RLA-145); Hearing Tr., Day 1 (6 April 2021), 105:17-23. ↩

¹⁵⁰ Statement of Defence, paras. 321, 324; Rejoinder, paras. 197, 203; Hearing Tr., Day 1 (6 April 2021), 105:9-16. ↩

¹⁵¹ Hearing Tr., Day 7 (14 April 2021), 1135:22-1136:10. ↩

[Page 38]

while the Programme was ongoing the Claimant never stated that any shortcomings in the red channel system prevented them from respecting the 10% Fee Cap, nor did it reserve its rights on this issue.¹⁵² For the Respondent, the Claimant’s assertion that it had no other option but to comply to with the 10% Fee Cap, as otherwise its position in the Programme would have been jeopardized, lacks any evidentiary basis.¹⁵³

109. With respect to the payment of the Claimant’s invoices in Pesos, the Respondent maintains that the Claimant submitted invoices for fees in Pesos during the first three years of the Programme, only to begin to issue invoices in U.S. dollars in May 2001.¹⁵⁴ For the Respondent, this constitutes tacit consent to the payment of those invoices in Pesos.¹⁵⁵ The Respondent disputes the Claimant’s contention that the currency in which its invoices were issued was irrelevant prior to the enactment of the Emergency Law, as the Claimant began invoicing in U.S. dollars in May 2001, prior to the enactment of the Emergency Law in January 2002.¹⁵⁶ In addition, the Respondent contends that the Claimant’s objections to the Peso-denominated invoices in 2002 were submitted belatedly given that, at that time, the Contract had expired and the respective payments had already been collected in Pesos.¹⁵⁷

110. With respect to the application of Decree 1060/01, the Respondent asserts that the Claimant voluntarily decided to submit to the regime established in this decree “as it continued to provide services after the expiration of its Contract when such decree was already in force.”¹⁵⁸ In addition, the Respondent contends that the Claimant submitted the credit notes relating to the invoices for the auditing services as from July 2001 for application of the reduction established by Decree 1060/01 “without raising any objection or expressing any reservation.”¹⁵⁹

¹⁵² Hearing Tr., Day 7 (14 April 2021), 1139:4-1141:1. See also ibid., 1111:14-1112:15. ↩

¹⁵³ Rejoinder, para. 200. ↩

¹⁵⁴ Statement of Defence, paras. 321, 324; Hearing Tr., Day 1 (6 April 2021), 105:9-16. ↩

¹⁵⁵ Hearing Tr., Day 7 (14 April 2021), 1135:22-1136:10. ↩

¹⁵⁶ Rejoinder, paras. 198-199; Hearing Tr., Day 7 (14 April 2021), 1138:18-1139:3. ↩

¹⁵⁷ Hearing Tr., Day 7 (14 April 2021),1137:10-20. ↩

¹⁵⁸ Rejoinder, para. 205. ↩

¹⁵⁹ Rejoinder, para. 205. ↩

[Page 39]

2. Good faith

111. The Respondent submits that the principle of good faith, enshrined in both public international law and Argentine law, “bars Claimant from acting in an abusive fashion in this proceeding.”¹⁶⁰ The Respondent reiterates that the Claimant has contradicted itself by issuing invoices in U.S. dollars and exceeding the 10% Fee Cap as from May 2001 and January 2002, respectively, given that until then it had consistently submitted invoices in Pesos and within the 10% Fee Cap.¹⁶¹ The Respondent adds that the Claimant attempted to obtain additional compensation for the alleged “special services”, when such services were part of the auditing services that the Respondent had already paid for.¹⁶² The Respondent argues that the Claimant decided to undertake such actions in early 2001, seeking to take advantage “of utter institutional, social and economic chaos”.¹⁶³

3. Extinctive prescription

112. The Respondent submits that the principle of extinctive prescription forbids the submission of untimely claims where a significant delay in the submission of a claim is attributable to the negligence of the claimant.¹⁶⁴ According to the Respondent, the absence of a provision in the Treaty establishing a specific time limit to bring a claim does not preclude the application of the principle of extinctive prescription, as has been confirmed by various international tribunals.¹⁶⁵

113. The Respondent alleges that, out of the four measures the Claimant complains of, the last to be implemented was the application of Decree 1060/01 by AFIP and the Committee in June 2003.¹⁶⁶ Yet, the Respondent contends that it was not until late June 2009 that it initiated the ICS I

¹⁶⁰ Statement of Defence, paras. 326-334; Rejoinder, para. 207; Hearing Tr., Day 1 (6 April 2021), 101:1-10; Phoenix Action Ltd. v. Czech Republic, ICSID Case No. ARB/06/5, Award, 5 April 2009, para. 107 (RLA-10). ↩

¹⁶¹ Statement of Defence, para. 336; Rejoinder, para. 211; Hearing Tr., Day 1 (6 April 2021), 78:14-79:21, 102:6-104:24. ↩

¹⁶² Statement of Defence, para. 337; Rejoinder, para. 212. ↩

¹⁶³ Statement of Defence, paras. 338-339; Hearing Tr., Day 1 (6 April 2021), 78:14-79:21. ↩

¹⁶⁴ Statement of Defence, paras. 344, 348; Bin Cheng, “General Principles of Law as Applied by Intentional Courts and Tribunals” (1987), p. 372 (RLA-125). ↩

¹⁶⁵ Rejoinder, paras. 219-220; Nordzucker AG v. Republic of Poland, Partial Award, 10 December 2008, para. 221 (RLA-176); Caratube International Oil Company LLP and Devincci Salah Hourani v. Kazakhstan, ICSID Case No. ARB/13/13, Award, 27 September 2017, paras. 420, 421 (RLA-292). ↩

¹⁶⁶ Rejoinder, para. 226; Hearing Tr., Day 1 (6 April 2021), 106:14-18. ↩

[Page 40]

arbitration.¹⁶⁷ The Respondent denies that there were any amicable settlement negotiations from 2002 to 2006 that could justify the delay in the Claimant putting forward its claims.¹⁶⁸

114. Contrary to the Claimant’s assertions, the Respondent submits that it is not required to demonstrate that the delay placed the responding party at a disadvantage.¹⁶⁹ However, even if such a requirement were to apply, the Respondent argues that the Parties’ inability to produce documents requested during the document production phase as a result of the passage of time confirms that prejudice has arisen from the Claimant’s delay.¹⁷⁰ The Respondent similarly points out that delay has rendered key witness testimony unavailable, such as that of any of the members of the Committee.¹⁷¹

B. THE CLAIMANT'S POSITION

1. Acquiescence and estoppel

115. Relying on Article 45(b) of the International Law Commission Articles on the Responsibility of States for Internationally Wrongful Acts (the “ILC Articles”), the Claimant contends that acquiescence “require[s] proof of the Claimant’s tacit consent to the relevant measures.”¹⁷² However, the Claimant insists that it never consented, whether tacitly or otherwise, to the conversion of dollar-denominated invoices into Pesos and the application of the 10% Fee Cap.¹⁷³ In the Claimant’s view, this distinguishes the present case from the case of Lauder v. Czech Republic and M.C.I. Power v. Ecuador cited by the Respondent.¹⁷⁴

¹⁶⁷ Statement of Defence, para. 350; Rejoinder, para. 226; Hearing Tr., Day 1 (6 April 2021), 106:18-107:10. ↩

¹⁶⁸ Rejoinder, paras. 228-229; Letter from ICS to the Argentine Treasury Attorney General, 27 November 2006 (RLA-179). ↩

¹⁶⁹ Rejoinder, paras. 230-234; SGS Société Générale de Surveillance S.A. v. the Republic of Paraguay, ICSID Case No. ARB/07/29, Award, 10 February 2012, para. 162 (CLA-54); Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Award, 8 December 2000, para. 106 (CLA-49). ↩

¹⁷⁰ Rejoinder, para. 235; Hearing Tr., Day 7 (14 April 2021), 1142:9-1145:20. ↩

¹⁷¹ Hearing Tr., Day 7 (14 April 2021), 1142:9-1145:20. ↩

¹⁷² Reply, paras. 122-124; ILC Articles on State Responsibility, Article 45 (CLA-85); N. S. Marques Antunes, Acquiescence in R. Wolfrum (ed.), The Max Planck Encyclopedia of Public International Law, OUP, Volume I, 2012, p. 53, para. 2 (CLA-132); Hearing Tr., Day 1 (6 April 2021), 31:1-4. ↩

¹⁷³ Reply, paras. 125-130; Hearing Tr., Day 1 (6 April 2021), 31:20-32:6. ↩

¹⁷⁴ Reply, paras. 131-132; Ronald S. Lauder v. The Czech Republic, UNCITRAL, Final Award, 3 September 2001, para. 271 (CLA-7); M.C.I. Power Group L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6, Award, 31 July 2007, para. 301 (RLA-143). See also, Hearing Tr., Day 1 (6 April 2021), 34:7-35:15; Hearing Tr., Day 7 (14 April 2021), 1020:8-14. ↩

[Page 41]

116. The Claimant contends that, when the Peso was pegged to the U.S. Dollar, “it made no difference whether the Claimant issued its invoices in Pesos or US Dollars.”¹⁷⁵ So, the Claimant avers that its issuance of invoices in pesos from March 1998 to May 2001 was immaterial.¹⁷⁶ However, once the Emergency Law decoupled the dollar-peso exchange rate, the Claimant contends that the issuance of invoices in Pesos became inconsistent with the Claimant’s contractual right to set the value of its fees in U.S. dollars.¹⁷⁷

117. The Claimant submits that it also did not consent to the 10% Fee Cap.¹⁷⁸ It is the Claimant’s position that it repeatedly complained to Argentina about its failure to implement an adequate selection system, which underlies the Claimant’s claim for exemption from the 10% Fee Cap.¹⁷⁹ The Claimant also submits that “ICS had no choice but to comply with Argentina’s demands and issue capped invoices”, as the Respondent would not otherwise make even partial payment of the Claimant’s fees.¹⁸⁰ Furthermore, the Claimant contends that it formally challenged the application of the 10% Fee Cap on multiple occasion since December 2001, including in the context of the administrative claims filed in March 2002 and December 2004 and the ICS I arbitration.¹⁸¹

118. As for estoppel, the Claimant submits that the Respondent has failed to discharge its burden of establishing the essential elements of estoppel in the instant case, including (i) a statement of fact which is clear and unambiguous given voluntarily, unconditionally, and duly authorised; and (ii) reliance in good faith upon the statement either to the detriment of the party so relying on the statement or to the advantage of the party making the statement.¹⁸² The Claimant maintains that the Respondent has not shown that (i) “the Claimant made a clear and unambiguous statement of fact, given voluntarily, unconditionally, and duly authorised, that it would wholly abandon its rights with respect to amounts above the 10% Fee Cap and/or the full US Dollar value of its

¹⁷⁵ Reply, para. 126. ↩

¹⁷⁶ Reply, paras. 126-128; Hearing Tr., Day 1 (6 April 2021), 32:7-21. ↩

¹⁷⁷ Reply, para. 126. ↩

¹⁷⁸ Reply, paras. 129-130. ↩

¹⁷⁹ Reply, para. 129; Hearing Tr., Day 1 (6 April 2021), 32:22-33:8. ↩

¹⁸⁰ Reply, para. 129; First Santamaria Statement, paras. 26-27; Hearing Tr., Day 1 (6 April 2021), 33:9-16. ↩

¹⁸¹ Reply, para. 130; Hearing Tr., Day 1 (6 April 2021), 33:17-34:6. ↩

¹⁸² Reply, paras. 135-138; Land, Island and Maritime Frontier Dispute (El Salvador v. Honduras) [1990] ICJ Rep 92 at 118, para. 63 (CLA-189); Pope & Talbot Inc. v. The Government of Canada, Interim Award, 26 June 2000, para. 111 (CLA-191); Pan American Energy LLC and BP Argentina Exploration Company v. The Argentine Republic, ICSID Case No. ARB/03/13, Decision on Preliminary Objections, 27 July 2006, para. 159 (RLA-60); Canfor Corporation v. United States of America; Terminal Forest Products Ltd. v. United States of America, Order of the Consolidation Tribunal, 7 September 2005, para. 169 (RLA-145); Hearing Tr., Day 1 (6 April 2021), 31:6-11. ↩

[Page 42]

invoices”; nor that (ii) “Argentina relied upon such statement in good faith and detrimentally, so that reversal of the Claimant’s alleged position would cause serious injustice to Argentina”.¹⁸³

2. Good faith

119. The Claimant submits that the Respondent’s preliminary good faith defence is legally and factually misconceived.¹⁸⁴ The Claimant contends that any inconsistency with the principle of good faith “would be engaged presumably through another international law rule because [...] good faith is [not] a principle in international law that creates a self-standing obligation.”¹⁸⁵ However, the Claimant contends that such assertions by the Respondent “are entirely unfounded and fall short of the high standard required under international law”.¹⁸⁶ The Claimant further disputes the Respondent’s assertion that the Claimant engaged in an abuse of rights by claiming “sums that it considers it is entitled to by application of the [Treaty] and the Contract.”¹⁸⁷

3. Extinctive prescription

120. The Claimant submits that arbitral practice confirms that extinctive prescription does not apply unless the applicable BIT contains a limitation period or similar time limit for bringing the claim, which the Treaty does not.¹⁸⁸ However, the Claimant submits that, even if extinctive prescription were applicable, its requirements are not fulfilled in this case.¹⁸⁹

121. First, the Claimant maintains that a particularly long delay is needed, noting that all of the cases cited have involved delays of 30 years or more.¹⁹⁰ However, the Claimant contends that it “pursued its claim diligently from the outset and throughout the course of this dispute.”¹⁹¹ The

¹⁸³ Reply, para. 139. ↩

¹⁸⁴ Hearing Tr., Day 7 (14 April 2021), 1019:1-24. ↩

¹⁸⁵ Hearing Tr., Day 1 (6 April 2021), 35:22-36:3. ↩

¹⁸⁶ Reply, para. 7, fn. 2. ↩

¹⁸⁷ Hearing Tr., Day 7 (14 April 2021), 1019:1-24. ↩

¹⁸⁸ Reply, para. 143; SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29, Award, 10 February 2012, para. 166 (CLA-54); H&H Enterprises Investments, Inc. v. Arab Republic of Egypt, ICSID Case No. ARB 09/15, Decision on Jurisdiction, 5 June 2012, paras. 87-88 (CLA-70). ↩

¹⁸⁹ Reply, paras. 145-154. ↩

¹⁹⁰ Reply, para. 147(a); Irene Roberts case, RIAA, Vol. IX, p. 207 (CLA-136); Tagliaferro case, RIAA, Vol. Χ, 1903, p. 593 (CLA-137); Giacopini case RIAA, Vol. X, p. 594 (CLA-138); Gentini case, RIAA, Vol. Χ, p. 556 (CLA-139), see also pp. 551, 558; Spader case, RIAA, Vol. IX, p. 224 (CLA-140). ↩

¹⁹¹ Reply, para. 149. ↩

[Page 43]

Claimant maintains that, upon the termination of the Programme in February 2002, it demanded payment of overdue and unpaid invoices and then filed an administrative claim in March 2002.¹⁹² The Claimant adds that it reserved its rights when it was “forced to give in to Argentina’s demands” to issue invoices denominated in Pesos and reduced its fees by 13% in December 2002 and December 2004, respectively.¹⁹³ The Claimant thereafter notified Argentina of its claim under the BIT in November 2006.¹⁹⁴ The Claimant adds that the Respondent was in contact with the Claimant and provided partial payments up to January 2006.¹⁹⁵ The Claimant thus asserts that, even if there was a delay, “such delay was neither unreasonable, nor nearly long enough to lead to the extinctive prescription.”¹⁹⁶

122. Second, the Claimant underscores that delay arising from attempts to settle a dispute “is not regarded as undue delay”.¹⁹⁷ According to the Claimant, it spent years trying to reach an amicable settlement that resulted in Argentina making partial payments of unpaid invoices in 2003 and 2006.¹⁹⁸ The Claimant alleges that it was only after such settlement negotiations “broke down” that it resorted to arbitration.¹⁹⁹

123. Third, the Claimant contends that no prejudice to the Respondent has arisen from any delay.²⁰⁰ It is the Claimant’s position that the repeated demands for payments since the early stages of the dispute “would (or should) have put Argentina on notice regarding the need to collect and preserve evidence with respect to the Claimant’s claims”.²⁰¹ In any event, the Claimant submits that the evidence submitted by both Parties in these proceedings confirm that any alleged delay did not ultimately lead to the disappearance or unavailability of relevant evidence.²⁰²

¹⁹² Reply, para. 149. ↩

¹⁹³ Reply, para. 149. ↩

¹⁹⁴ Reply, para. 149. ↩

¹⁹⁵ Hearing Tr., Day 7 (14 April 2021), 1021:16-1022:7. ↩

¹⁹⁶ Reply, para. 150; Hearing Tr., Day 1 (6 April 2021), 12:6-10. ↩

¹⁹⁷ Reply, paras. 147(b), 151; Ioannis Kardassopoulos v. The Republic of Georgia, ICSID Case No. ARB/05/18, Award, 3 March 2010, para. 261 (CLA-143). ↩

¹⁹⁸ Reply, para. 151. ↩

¹⁹⁹ Reply, para. 151. ↩

²⁰⁰ Reply, para. 152. ↩

²⁰¹ Reply, para. 153. ↩

²⁰² Reply, para. 153. ↩

[Page 44]

C. THE TRIBUNAL'S ANALYSIS

124. The Tribunal recalls the preliminary decision in its Award on Jurisdiction on the Respondent’s objections of acquiescence, prescription, and good faith, wherein it deferred consideration of these issues to the merits phase of the arbitration. This decision was premised on the conclusion that these defences “address the substance of the dispute and not the power of the Tribunal to rule on them”.²⁰³ However, the Tribunal also supported this deferral on the basis that it would wish to “be sure that it has before it the complete factual and legal basis of the dispute” before definitively resolving these issues.

125. Having considered in full the Parties’ submissions and evidence, the Tribunal concludes that the Respondent’s defences must fail on several counts.

126. The Respondent’s objections—although formulated under the distinct headings of acquiescence, estoppel, good faith, and extinctive prescription—all have their root in the principle of good faith in international law. As already recorded in the Tribunal’s Award on Jurisdiction, the Parties are further agreed that all of these doctrines address a party’s implied consent by way of statements, actions, or omissions in response to certain actions or omissions by another party.²⁰⁴ The attempt to repudiate such consent at a later point in time runs counter to good faith.²⁰⁵

127. Taking the above as the basis for the analysis of the Respondent’s objections, the Tribunal finds that there is no positive statement nor any significant period of silence or inactivity—let alone acquiescence—which would support the objections. That is, the record shows no significant period during which the Claimant was idle and did not protest the measures underlying its claims in this arbitration. From the inception of those measures until the commencement of the prior arbitration between the Parties, and eventually this arbitration, the Claimant has objected to the measures in question whenever it would have been expected to do so. Indeed, since shortly after the termination of the concession, these issues have been the subject of pending administrative, arbitral, and court proceedings.²⁰⁶

128. In respect of the 10% Fee Cap, the Respondent argues that the Claimant first objected only in May 2001, when it should have been expected to do so throughout the Programme. However, this

²⁰³ Award on Jurisdiction, para. 379. ↩

²⁰⁴ Award on Jurisdiction, paras. 371-374. ↩

²⁰⁵ Award on Jurisdiction, paras. 373-374. ↩

²⁰⁶ See supra paras. 89-105. ↩

[Page 45]

ignores the complaints levelled by the Claimant against the administration of the “red notice” system, which is at the root of its claim that the application of the 10% Fee Cap was unreasonable.²⁰⁷ It also ignores the reservation of rights expressly made by the Claimant when issuing capped invoices.²⁰⁸

129. In respect of invoicing in Pesos versus U.S. dollars, the Respondent argues that the Claimant invoiced in Pesos during the pendency of the Contract. However, this ignores the fact that the peso-dollar peg rendered the currency immaterial. It also ignores the distinction between the value of the service rendered under the Contract, which was determined by reference to U.S. dollars, and the currency of invoices, which was stipulated to be Pesos.²⁰⁹

130. In respect of Decree 1060, the Respondent argues that the Claimant subjected itself to the application of this law by continuing to discharge its functions under the Contract. However, this ignores that national law doctrines by which a party may be taken to have submitted itself to a given legal regime or to certain legal consequences by conduct that is deemed to constitute consent in national law do not necessarily rise to the level of demonstrating acquiescence at an international level.

131. Accordingly, the Tribunal finds that the Respondent has not established a factual basis for its claims of acquiescence, estoppel, good faith, and prescription. The Tribunal thus dismisses these objections.

²⁰⁷ See supra paras. 74, 79-81. ↩

²⁰⁸ See infra para. 160. ↩

²⁰⁹ See supra paras. 64-67. ↩

[Page 46]

VII. THE MERITS OF THE DISPUTE

132. The Claimant claims that the Respondent has violated Article 2(2) of the Treaty by:

• (a) wrongfully withholding payment of amounts exceeding the 10% Fee Cap in connection with Ordinary Services rendered by the Claimant;
• (b) unlawfully pesifying the Claimant’s invoices;
• (c) unlawfully applying [Decree] 1060/01 to reduce certain of the Claimant’s invoices by 13%; and
• (d) failing to compensate the Claimant for Special Services which were rendered by the Claimant to Argentina at its request.²¹⁰

133. The Claimant submits that the above measures breached the four different standards of protection set forth in Article 2(2), namely, the obligations concerning fair and equitable treatment (“FET”), unreasonable or discriminatory measures, full protection and security (“FPS”), and the umbrella clause.²¹¹ The Claimant has not put forward separate arguments in respect of each of these Treaty obligations, but rather focusses on the impugned measures, which it contends violate the Contract and Argentine law and thereby also the Treaty.²¹²

134. The Respondent submits that the Claimant’s claims lack merit as the Respondent has “made all the relevant payments for the auditing services provided by Claimant” within the terms of the Contract and the applicable laws and regulations.²¹³

A. PROTECTIONS AFFORDED BY ARTICLE 2(2) OF THE TREATY

135. The Claimant submits that, pursuant to Article 2(2) of the Treaty, the Respondent (i) is bound to afford the Claimant’s investment FET, FPS, and to observe any obligation it may have entered into with regard to it (also occasionally referred to as the “Umbrella Clause”); and (ii) is restricted from adopting any unreasonable or discriminatory measure by the Respondent that in any way impairs the management, maintenance, use, enjoyment or disposal of the Claimant’s investment.²¹⁴

²¹⁰ Statement of Claim, para. 122. ↩

²¹¹ Statement of Claim, Section D.2; Reply, para. 70. ↩

²¹² Reply, para. 8. ↩

²¹³ Rejoinder, para. 42. ↩

²¹⁴ Statement of Claim, para. 123. ↩

[Page 47]

1. The Content of the FET Standard

(a) The Claimant's Position

136. The Claimant maintains that the FET standard in Article 2(2) of the Treaty, interpreted in accordance with Article 31 of the VCLT, establishes an autonomous standard which is not limited to the minimum standard of treatment under customary international law.²¹⁵ The Claimant states that the jurisprudence confirms that, “absent explicit wording to the contrary, the FET standard is not limited to the minimum standard of treatment under international law.”²¹⁶ The Claimant underscores that the tribunal in National Grid v. Argentina reached this very conclusion in respect of Article 2(2) of the present Treaty.²¹⁷ In any event, the Claimant submits that, even if the FET standard were to be equated to the customary international law minimum standard, the standard has evolved since its application in the Neer case, such that there is no meaningful difference to be made between the minimum standard of treatment under customary international law and an autonomous standard.²¹⁸

137. The Claimant further submits that the FET standard “is very broad, and its meaning will depend on the specific circumstances of the case at issue”.²¹⁹ Relying on the practice of arbitral tribunals, the Claimant contends that the FET standard may encompass the host state’s obligation to (i) protect the investor’s legitimate expectations based on the legal framework and on any

²¹⁵ Reply, paras. 92-93. ↩

²¹⁶ Reply, paras. 94-100; National Grid P.L.C v. The Argentine Republic, Award, 3 November 2008, paras. 167-169 (CLA-10); Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan, ICSID Case No. ARB/12/1, Decision on Liability, 10 November 2017, para. 6 (CLA-175); Deutsche Telekom A.G. v. India, PCA Case No. 2014-10, Interim Award, 13 December 2017, para. 330 (CLA-176); Indian Metals & Ferro Alloys Ltd v. Republic of Indonesia, PCA Case No. 2015-40, Award, 29 March 2019, para. 225 (CLA-177); Cervin Investissements S.A. and Rhone Investissements S.A. v. Republic of Costa Rica, ICSID Case No. ARB/13/2, Final Award, 7 March 2017, paras. 452-453 (CLA-178); Hearing Tr., Day 1 (6 April 2021), 21:7-22:23. ↩

²¹⁷ Reply, para. 94; National Grid P.L.C v. The Argentine Republic, Award, 3 November 2008, paras. 167-169 (CLA-10). ↩

²¹⁸ Reply, para. 101; Thomas Gosling and others v. Republic of Mauritius, ICSID Case No. ARB/16/32, Award, 18 February 2020, para. 243 (CLA-187); Saluka Investments B.V. v. The Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006, para. 291 (CLA-11); Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008, para. 592 (CLA-47); Rumeli Telekom A.S. and another v. Kazakhstan, ICSID Case No ARB/05/16, Award, 29 July 2008, para. 611 (CLA-91); Hearing Tr., Day 1 (6 April 2021), 23:22-24:6. ↩

²¹⁹ Statement of Claim, paras. 125-127; Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/00/3, Final Award, 30 April 2004, para. 99 (CLA-6); Ronald S. Lauder v. The Czech Republic, Award, 3 September 2001, para. 292 (CLA-7); Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award, 12 October 2005, para. 181 (CLA-8). ↩

[Page 48]

undertakings made by the host State;²²⁰ (ii) maintain a stable and predictable legal and business environment;²²¹ (iii) act transparently and consistently;²²² (iv) comply with its contractual obligations vis-à-vis the investor;²²³ (v) act in good faith;²²⁴ and (vi) not unjustly enrich itself.²²⁵

(b) The Respondent's Position

138. The Respondent submits that the FET standard provided for in Article 2(2) of the Treaty is equivalent to the minimum standard of treatment under customary international law.²²⁶ According to the Respondent, this minimum standard was defined in the Neer case as treatment that would “amount to an outrage, to bad faith, to wilful neglect of duty, or to an insufficiency of governmental action so far short of international standards that every reasonable and impartial

²²⁰ Statement of Claim, paras. 128, 130-134; Reply, para. 88; National Grid P.L.C v. The Argentine Republic, Award, 3 November 2008, para. 173 (CLA-10); Saluka Investments B.V. v. The Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006, paras. 301-302 (CLA-011); Frontier Petroleum Services Ltd. v. The Czech Republic, Final Award, 12 November 2010, para. 285 (CLA-015); Hearing Tr., Day 1 (6 April 2021), 26:15-27:4. ↩

²²¹ Statement of Claim, paras. 128, 135-137; Reply, para. 88; CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8, Award, 12 May 2005, paras. 274-276 (CLA-016); Sempra Energy International v. The Argentine Republic, ICSID Case No. ARB/02/16, Award, 28 September 2007, para. 300 (CLA-22); Gami Investments, Inc. v. The Government of the United Mexican States, Final Award, 15 November 2004, para. 91 (CLA-23). ↩

²²² Statement of Claim, paras. 128, 138-140; Reply, para. 88; Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1, Award, 30 August 2000, para. 76 (CLA-24); Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003, para. 167 (CLA-9); MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award, 25 May 2004, para. 163 (CLA-25). ↩

²²³ Statement of Claim, paras. 128, 141-145, Reply, para. 88; Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award, 11 October 2002, para. 134 (CLA-5); SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29, Decision on Jurisdiction, 2 February 2010, para. 146 (CLA-3); Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award, 12 October 2005, para. 182 (CLA-8); Eureko B.V. v. Republic of Poland, Partial Award, 19 August 2005, para. 232 (CLA-26). ↩

²²⁴ Statement of Claim, paras. 128, 146-149; Reply, para. 88; Sempra Energy International v. The Argentine Republic, ICSID Case No. ARB/02/16, Award, 28 September 2007, paras. 297-299 (CLA-22); Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003, para. 153 (CLA-9); Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/00/3, Final Award, 30 April 2004, para. 138 (CLA-6); Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award, 6 February 2007, para. 308 (CLA-29); Saluka Investments B.V. v. The Czech Republic, Partial Award, 17 March 2006, para. 307 (CLA-11); Frontier Petroleum Services Ltd. v. The Czech Republic, UNCITRAL, Final Award, 12 November 2010, para. 300 (CLA-15). ↩

²²⁵ Statement of Claim, paras. 128, 150-151; Reply, para. 88; A. Nussbaum, Arbitration Between the Lena Goldfields Ltd. and the Soviet Government, 36 Cornell L. Rev. 31 (1950) (CLA-38); Saluka Investments B.V. v. The Czech Republic, UNCITRAL, Partial Award, 17 March 2006, paras. 448-456 and 502 (CLA-11). ↩

²²⁶ Statement of Defence, paras. 354-363; Rejoinder, para. 239. ↩

[Page 49]

man would readily recognize its insufficiency.”²²⁷ The Respondent maintains that current case law reaffirms this standard.²²⁸ For instance, the Respondent refers to the award in Lauder v. Czech Republic, in which the tribunal determined that, absent a definition of FET in the applicable treaty, this standard “provides a ‘minimum international standard which forms part of customary international law’”.²²⁹ The Respondent argues that this is consistent with the interpretation of the Treaty under the VCLT.²³⁰

139. The Respondent further asserts that the FET standard does not encompass the protection of legitimate expectations of investors or a guarantee of legal and business stability.²³¹ Relying on the annulment decision in MTD v. Chile, the Respondent avers that “[t]he obligations of the host State towards foreign investors derive from the terms of the applicable investment treaty and not from any set of expectations investors may have or claim to have”.²³² The Respondent further cites Hochtief v. Argentina for the idea that, absent a specific promise by Argentina, the Claimant had no legitimate expectation that the legislation on Peso-U.S. dollar parity would be maintained indefinitely.²³³ Finally, the Respondent maintains that “mere breaches of contract do not amount to violations of the fair and equitable treatment standard.”²³⁴ For the Respondent, a violation of the FET standard requires the Claimant to establish that the Respondent committed a breach in exercise of its sovereign power.²³⁵

²²⁷ Statement of Defence, para. 355. ↩

²²⁸ Rejoinder, paras. 243-247; Hearing Tr., Day 1 (6 April 2021), 107:15-108:3; Glamis Gold, Ltd. v. United States of America, Award, 8 June 2009, paras. 614-615 (RLA-183); Alex Genin, Eastern Credit Limited, Inc. y A.S. Baltoil v. Republic of Estonia, ICSID Case No. ARB/99/2, Award, 25 June 2001 (RLA-186). ↩

²²⁹ Rejoinder, para. 244; Ronald S. Lauder v. Czech Republic, Award, 3 September 2002, para. 292 (RLA-144). ↩

²³⁰ Rejoinder, para. 246. ↩

²³¹ Statement of Defence, paras. 369-378; Rejoinder, para. 239; Hearing Tr., Day 1 (6 April 2021), 108:4-18. ↩

²³² Statement of Defence, para. 371; Rejoinder, para. 239; MTD Equity Sdn Bhd. & MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Decision on Annulment, 21 March 2007, paras. 66-67 (RLA-208). ↩

²³³ Statement of Defence, para. 374; Rejoinder, para. 249; Hochtief AG v. Argentine Republic, ICSID Case No. ARB/07/31, Decision on Liability, 29 December 2014, para. 239 (RLA-107). ↩

²³⁴ Statement of Defence, para. 375; Rejoinder, para. 241; Bayindir Insaat Turizm Ticaret Ve Sanayi A. Ş. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award, 27 August 2009, para. 180 (RLA-209). ↩

²³⁵ Statement of Defence, para. 375; Rejoinder, para. 241; Bayindir Insaat Turizm Ticaret Ve Sanayi A. Ş. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award, 27 August 2009, para. 180 (RLA-209). ↩

[Page 50]

2. Protection from unreasonable or discriminatory measures

(a) The Claimant's Position

140. The Claimant notes that, in addition to FET, Article 2(2) also provides that “[n]either Contracting Party shall in any way impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory of investors of the other Contracting Party”.²³⁶ The Claimant submits that, under this obligation, the relevant question is “whether the measures complained about by the Claimant are either ‘unreasonable’ and/or ‘discriminatory’”.²³⁷

141. The Claimant asserts that the protection in respect of “unreasonable” measures substantially overlaps with the FET standard.²³⁸ The Claimant points out that a number of tribunals have equated “unreasonable” with “unfair”.²³⁹ However, the Claimant maintains that it would be inappropriate to equate “unreasonableness” with “arbitrariness”, given that the latter term does not appear in Article 2(2).²⁴⁰ The Claimant emphasizes that this is consistent with the findings of the tribunal in BG Group v. Argentina, which also applied Article 2(2) of the same Treaty.²⁴¹

(b) The Respondent's Position

142. According to the Respondent, the standard of protection against unreasonable and discriminatory measures under Article 2(2) of the Treaty includes two types of measures.²⁴² On the one hand, “unreasonable” measures for the Respondent “refer to measures adopted with no rationale behind them”.²⁴³ The Respondent contends that, as held in National Grid v. Argentina, the plain meaning of the terms “unreasonable” and “arbitrary” “is substantially the same in the sense of something

²³⁶ Statement of Claim, para. 152; Reply, para. 111. ↩

²³⁷ Reply, para. 112. ↩

²³⁸ Statement of Claim, para. 153. ↩

²³⁹ Statement of Claim, para. 154; MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award, 25 May 2004, para. 196 (CLA-25); CME Czech Republic B.V. v. The Czech Republic, Partial Award, 13 September 2001, para. 612 (CLA-39). ↩

²⁴⁰ Statement of Claim, para. 155; Reply, paras. 111-114; Cambridge Dictionary, definition of the term “Unreasonable” (C-143); Cambridge Dictionary, definition of the term “Arbitrary” (C-144); Hearing Tr., Day 1 (6 April 2021), 30:11-19. ↩

²⁴¹ Reply, para. 115; BG Group PLC. v. The Republic of Argentina, Final Award, 24 December 2007, paras. 340-342 (CLA-40). ↩

²⁴² Statement of Defence, paras. 408-414; Rejoinder, paras. 274-279. ↩

²⁴³ Rejoinder, para. 12. ↩

[Page 51]

done capriciously, without reason”.²⁴⁴ On the other hand, the Respondent asserts that “discriminatory” measures “are measures that make an unjustified difference in treatment between two parties that are in similar situations.”²⁴⁵

143. The Respondent contends that the unreasonable and discriminatory measures standard and FET standard afford different types of protection.²⁴⁶ Otherwise, in the Respondent’s view, the Tribunal should decide that it is unnecessary to address these claims separately.²⁴⁷

3. Full protection and security

(a) The Claimant's Position

144. The Claimant observes that Article 2(2) further establishes that “[i]nvestments of investors of each Contracting Party [...] shall enjoy protection and constant security in the territory of the other Contracting Party”.²⁴⁸ Given the provision’s unqualified text, the Claimant affirms, it requires the Respondent to protect both the physical and legal security of the Claimant’s investment.²⁴⁹ This is supported, in the Claimant’s view, by the fact that the definition of “investment” in the Treaty covers both physical assets and intangible assets. As noted in Siemens v. Argentina, the Claimant contends that “[i]t is difficult to understand how the physical security of an intangible asset would be achieved”.²⁵⁰

145. The Claimant avers that the broad nature of the full protection and security standard has been confirmed by several tribunals, including the one in National Grid v. Argentina which applied the Treaty at issue in these proceedings and whose conclusion on this issue was “reinforced by the inclusion of this commitment in the same article of the Treaty as the language on fair and equitable treatment.”²⁵¹ The Claimant acknowledges that BG Group v. Argentina and AWG Group v.

²⁴⁴ Statement of Defence, para. 408; Rejoinder, para. 274; National Grid P.L.C. v. Argentine Republic, Award, 3 November 2008, para. 197 (CLA-10); Hearing Tr., Day 1 (6 April 2021), 108:19-109:9. ↩

²⁴⁵ Rejoinder, para. 277; Joseph C. Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Liability, 14 January 2010, para. 261 (RLA-294). ↩

²⁴⁶ Statement of Defence, paras. 405-407; Rejoinder, para. 272; Hearing Tr., Day 1 (6 April 2021), 119:10-21. ↩

²⁴⁷ Statement of Defence, paras. 405-407; Rejoinder, para. 273. ↩

²⁴⁸ Statement of Claim, para. 158; Reply, para. 103. ↩

²⁴⁹ Statement of Claim, para. 159; Reply, para. 104; Hearing Tr., Day 1 (6 April 2021), 30:4-10. ↩

²⁵⁰ Statement of Claim, para. 160; Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award, 6 February 2007, para. 303 (CLA-29). ↩

²⁵¹ Statement of Claim, paras. 160-165; Reply, para. 108; National Grid P.L.C v. The Argentine Republic, Award, 3 November 2008, paras. 187, 189 (CLA-10); Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award, 6 February 2007, para. 303 (CLA-29); Biwater Gauff (Tanzania) Ltd. v. ↩

[Page 52]

Argentina reached a different conclusion, but contends that they were wrongly decided.²⁵² On the one hand, the Claimant argues that BG Group v. Argentina ignored the specific terms and context of the obligation.²⁵³ Meanwhile, the Claimant considers that AWG Group v. Argentina improperly focussed on the absence of the word “full” in Article 2(2), rather than the unqualified nature of the provision.²⁵⁴

(b) The Respondent's Position

146. The Respondent asserts that the sole purpose of the standard of “protection and constant security” is to provide physical protection and security to investors and their investments, and does not extend to legal stability.²⁵⁵ The Respondent maintains that this is consistent with the decisions in BG Group v. Argentina and AWG Group v. Argentina under the same Treaty.²⁵⁶

4. Observance of undertakings (or Umbrella Clause)

(a) The Claimant's Position

147. The Claimant asserts that Article 2(2) also contains an umbrella clause, according to which “[e]ach Contracting Party shall observe any obligation it may have entered into with regard to investments of investors of the other Contracting Party”.²⁵⁷

²⁵² United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008, para. 729 (CLA-47); CME Czech Republic B.V. v. The Czech Republic, Partial Award, 13 September 2001, para. 613 (CLA-39); Čskoslovenska Obchodní Banka, A.S. v. The Slovak Republic, ICSID Case No. ARB/97/4, Award, 29 December 2004, para. 170 (CLA-48). ↩

²⁵³ Reply, para. 109; BG Group PLC. v. The Republic of Argentina, Final Award, 24 December 2007, para. 326 (CLA-40); AWG Group Ltd. v. The Argentine Republic, Decision on Liability, 30 July 2010, para. 175 (CLA-12). ↩

²⁵⁴ Reply, para. 109; BG Group PLC. v. The Republic of Argentina, Final Award, 24 December 2007, para. 326 (CLA-40). ↩

²⁵⁵ Reply, para. 109; AWG Group Ltd. v. The Argentine Republic, Decision on Liability, 30 July 2010, para. 175 (CLA-12). ↩

²⁵⁶ Statement of Defence, paras. 391-397; Rejoinder, para. 259; Hearing Tr., Day 1 (6 April 2021), 111:18-112:1. ↩

²⁵⁷ Statement of Defence, paras. 394-395; Rejoinder, paras. 259-262; BG Group PLC. v. The Republic of Argentina, Final Award, 24 December 2007, paras. 324, 326 (CLA-40); Suez, Sociedad General de Aguas de Barcelona S.A., Vivendi Universal S.A. and AWG Group Limited v. Argentine Republic, ICSID Case No. ARB/03/19, Decision on Liability, 30 July 2010, para. 175 (CLA-12); Hearing Tr., Day 1 (6 April 2021), 112:1-9. ↩

Statement of Claim, para. 168; Reply, para. 73.

[Page 53]

148. The Claimant submits that contractual commitments a host State has entered into with an investor constitute “obligations” within the meaning of the Umbrella Clause.²⁵⁸ In this respect, the Claimant emphasizes that, in its Award on Jurisdiction, the Tribunal held that “[s]ince the Umbrella Clause elevates the rights and obligations provided for in the Contract to the level of international law, a breach of these obligations is a breach of the Umbrella Clause.”²⁵⁹ Likewise, referring among others to the decision on jurisdiction in SGS v. Paraguay, the Claimant asserts that “[a]s a matter of the ordinary meaning of the term, a contractual obligation is the prototypical legally binding ‘commitment.’”²⁶⁰ The Claimant affirms that the inclusion of contractual commitments within the scope of the Umbrella Clause is also confirmed by other provisions of the Treaty.²⁶¹ In particular, the Claimant refers to the definition of “investment” (Article 1(a)), which covers “claims to money which are directly related to [...] any performance under contract having a financial value”, and a dispute resolution provision (Article 8) that provides that one of the sources of law to be applied shall be “the terms of any specific agreement concluded in relation to such an investment”.²⁶²

149. The Claimant disputes the Respondent’s contention that the scope of the Umbrella Clause is limited to obligations entered into by the Respondent acting as a sovereign entity, as opposed to a private party.²⁶³ The Claimant considers that the Respondent’s contention is inconsistent with the interpretation of the Umbrella Clause already made by the Tribunal in its Award on Jurisdiction.²⁶⁴ The Claimant underscores that the Tribunal held that:

One must begin with the plain meaning – the “ordinary meaning” – of the Umbrella Clause [...]. Considering the use of the mandatory term “shall”, the sentence is imperative. The expression “any obligation” is capacious, i.e. it is not limited to certain types of obligations but rather encompasses all obligations a host State may have entered into with regard to investments of investors of the other Contracting Party. [...] Interpreting the wording of the

²⁵⁸ Statement of Claim, paras. 169-170. ↩

²⁵⁹ Reply, para. 74; Award on Jurisdiction, para. 337; Hearing Tr., Day 1 (6 April 2021), 19:1-9. ↩

²⁶⁰ Reply, paras. 78-80; Statement of Claim, paras. 171-175; SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29, Award, 10 February 2012, paras. 90-91 (CLA-54); Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award, 12 October 2005, para. 51 (CLA-8); SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/02/6, Decision on Jurisdiction, 29 January 2004, para. 119 (CLA-2); Eureko B.V. v. Republic of Poland, Partial Award, 19 August 2005, para. 250 (CLA-26); SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29, Decision on Jurisdiction, 12 February 2010, paras. 91, 168 (CLA-3); Hearing Tr., Day 1 (6 April 2021), 15:14-16:15. ↩

²⁶¹ Statement of Claim, para. 176. ↩

²⁶² Statement of Claim, para. 176. ↩

²⁶³ Reply, paras. 77-78; Hearing Tr., Day 1 (6 April 2021), 14:22-15:11. ↩

²⁶⁴ Reply, paras. 77-78; Hearing Tr., Day 1 (6 April 2021), 14:22-15:6. ↩

[Page 54]

Umbrella Clause, it is clear that each Contracting Party shall observe any obligation it has assumed, or will in the future assume, with regard to investments covered by the Treaty.²⁶⁵

150. The Claimant points to a number of other decisions that have similarly eschewed such non-textual limitations when applying unqualified umbrella clauses.²⁶⁶

151. The Claimant further asserts that the application of the Umbrella Clause in respect of a particular obligation is not conditioned upon any domestic law procedural requirements, including domestic law time-bars, as such restrictions are not supported by the text of Article 2(2).²⁶⁷

(b) The Respondent's Position

152. The Respondent argues that the Umbrella Clause does not change the nature or content of, nor the law applicable to, the contractual obligations covered by such clause.²⁶⁸ Quoting the decision on annulment in CMS v. Argentina, the Respondent posits that “[t]he effect of the umbrella clause is not to transform the obligation which is relied on into something else; the content of the obligation is unaffected, as is its proper law.”²⁶⁹

153. In accordance with the foregoing, the Respondent submits that only actions taken by the State as a sovereign as opposed to a private capacity can breach the Umbrella Clause.²⁷⁰ The Respondent refers in this connection to various prior decisions, including Azurix v. Argentina, El Paso v. Argentina, and Supervisión y Control v. Costa Rica.²⁷¹ Contrary to the Claimant’s assertion, the Respondent argues that this contention does not contradict the Tribunal’s interpretation of the

²⁶⁵ Reply, para. 75; Award on Jurisdiction, para. 343; Hearing Tr., Day 1 (6 April 2021), 12:14-14:18. ↩

²⁶⁶ Reply, paras. 79-84; SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29, Award, 10 February 2012, paras. 90-91, 95, 135, 162 (CLA-54); Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Jurisdiction, 2 June 2010, para. 179 (CLA-154); Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador, ICSID Case No. ARB/04/19, Award, 18 August 2008, para. 320 (CLA-51). ↩

²⁶⁷ Hearing Tr., Day 7 (14 April 2021), 1014:18-1016:19. ↩

²⁶⁸ Statement of Defence, paras. 418-421; Rejoinder, para. 284; CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision on Annulment, 25 September 2007, para. 95(c) (RLA-62); Toto Costruzioni Generali S.p.A. v. The Republic of Lebanon, ICSID Case No. ARB/07/12, Decision on Jurisdiction, 11 September 2009, para. 202 (RLA-33); Hearing Tr., Day 1 (6 April 2021), 112:10-113:7. ↩

²⁶⁹ Statement of Defence, para. 419; CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision on Annulment, 25 September 2007, para. 95(c) (RLA-62). ↩

²⁷⁰ Statement of Defence, para. 422; Rejoinder, paras. 287-290. ↩

²⁷¹ Statement of Defence, para. 422; Rejoinder, paras. 287-290; Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/01/12, Award, 14 July 2006, para. 315 (CLA-28); Supervisión y Control S.A. v. Republic of Costa Rica, ICSID Case No. ARB/12/4, Award, 18 January 2017, para. 282 (RLA-281); El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Decision on Jurisdiction, 27 April 2006, paras. 82, 84 (RLA-64). ↩

[Page 55]

Umbrella Clause.²⁷² The Respondent notes that, in its Award on Jurisdiction, the Tribunal did “not refer to the types of measures that may violate the umbrella clause, but to the types of commitments that are protected by such standard.”²⁷³ In any event, the Respondent contends that the Tribunal’s observations regarding the effect of the Umbrella Clause in its Award on Jurisdiction constituted a “prima facie decision” that does not constrain the application of this provision to the merits of the dispute.²⁷⁴

154. Additionally, the Respondent maintains that the Umbrella Clause only applies to commitments “entered into” with the investor.²⁷⁵ It follows for the Respondent that, in the instant case, only the Contract during its pendency may be considered for the application of the Umbrella Clause, and not external laws or administrative regulations.²⁷⁶ The Respondent asserts that Decree 1060/2001 and Resolution 325 are thus irrelevant to the Claimant’s claim under the Umbrella Clause.²⁷⁷

B. WHETHER THE RESPONDENT BREACHED ARTICLE 2(2) OF THE TREATY

1. Application of the 10% Fee Cap

(a) The Claimant's Position

155. The Claimant submits that the Respondent breached Article 2(2) of the Treaty by wrongfully applying the 10% Fee Cap under Clause 3 of the Contract.²⁷⁸ The Claimant explains that, over the course of the Programme, it issued invoices for USD 4,538,571.58 that were never paid because they exceeded the 10% Fee Cap under the Contract.²⁷⁹ It is the Claimant’s position that the

²⁷² Rejoinder, para. 287. ↩

²⁷³ Rejoinder, para. 287; Award on Jurisdiction, para. 345. ↩

²⁷⁴ Rejoinder, para. 286. ↩

²⁷⁵ Statement of Defence, paras. 423-426; Rejoinder, paras. 285, 291; CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision on Annulment, 25 September 2007, para. 95(a) (RLA-62); Invesmart, B.V. v. Czech Republic, Award, 26 June 2009, para. 526 (RLA-219); Oxus Gold PLC v. The Republic of Uzbekistan, Award, 17 December 2015, paras. 364-371 (RLA-220); 9REN Holding S.à.r.l v. Kingdom of Spain, ICSID Case No. ARB/15/15, Award, 31 May 2019, para. 342 (RLA-223). ↩

²⁷⁶ Hearing Tr., Day 7 (14 April 2021), 1149:13-22. ↩

²⁷⁷ Hearing Tr., Day 7 (14 April 2021), 1149:23-1150:16. ↩

²⁷⁸ Statement of Claim, paras. 179-184; Reply, paras. 13-34. ↩

²⁷⁹ Reply, para. 34. ↩

[Page 56]

application of the 10% Fee Cap by the Respondent breached both the Contract and Argentine law, and thereby also violated Article 2(2) of the Treaty.²⁸⁰

156. First, the Claimant maintains that, under Clause 3 of the Contract, the application of the 10% Fee Cap was conditioned upon the Respondent’s establishment of an adequate system to select the Inspection Certificates to be audited by the Claimant.²⁸¹ According to the Claimant, Clauses 8 and 13 of the Contract, Article 6 of the Decree 477/97, and the fact that the Respondent attempted to put in place the “red channel” system further confirm that the Respondent was obliged to implement such a selection system.²⁸² However, the Claimant alleges that the Respondent “never implemented a functioning selection system.”²⁸³ The Claimant argues that the system that the Respondent did put in place - the “red channel” system – failed to work in practice because the “Customs Officials charged with alerting ICS every time there [was] an item to audit [...] simply” did not do so.²⁸⁴ The Claimant contends that different government officials acknowledged these practical shortcomings and ultimately instructed the Claimant to “install itself physically at the points of destination and to try to take as many dispatches as it can, [even if] this is not the ideal solution.”²⁸⁵

157. The Claimant asserts that the lack of an adequate selection system prevented it from complying with the 10% Fee Cap because, in the absence of such a system, it was not possible to know how much the Inspection Companies’ total invoicing would be for each quarter, and thus, where its own 10% Fee Cap would fall.²⁸⁶ Accordingly, the Claimant argues that the Respondent cannot invoke the 10% Fee Cap to refuse payment of amounts in excess thereof “in circumstances where its own failures to perform prevented ICS from being able to operate as intended”.²⁸⁷ According to the Claimant, the only entity that had access to the information necessary to estimate the 10%

²⁸⁰ Reply, para. 8. See also Statement of Claim, para. 179. ↩

²⁸¹ Statement of Claim, para. 180; Reply, paras. 19-22; Contract, Clause 3 (C-2); Hearing Tr., Day 7 (14 April 2021), 1065:4-1070:15. ↩

²⁸² Reply, para. 22; Contract, Clauses 8, 13 (C-2); Hearing Tr., Day 7 (14 April 2021), 1060:4-1061:6, 1063:11-1064:7; Decree 477/97, Article 6 and Annex III, Section c(VIII) (C-6). ↩

²⁸³ Statement of Claim, para. 181; Reply, para. 14. ↩

²⁸⁴ Hearing Tr., Day 1 (6 April 2021), 55:10-56:10; Report conducted at terminals 1 and 2, 4 February 1999 (C-28). ↩

²⁸⁵ Statement of Claim, para. 65; Letter from the Committee to AFIP, 6 August 1999 (C-32) (translation by the Claimant); Report conducted at terminals 1 and 2, 4 February 1999 (C-28); Hearing Tr., Day 1 (6 April 2021), 56:11-57:1; Hearing Tr., Day 2 (7 April 2021), 273:1-11. ↩

²⁸⁶ Reply, paras. 21-24; Hearing Tr., Day 1 (6 April 2021), 54:11-55; Hearing Tr., Day 7 (14 April 2021), 1024:21-1026:6. ↩

²⁸⁷ Statement of Claim, para. 182; Reply, para. 16; Hearing Tr., Day 1 (6 April 2021), 58:12-16. ↩

[Page 57]

Fee Cap was the Committee.²⁸⁸ The Claimant alleges that it did not have access to the databases of the Committee or the Inspection Companies.²⁸⁹ Even if it did have access to the databases of the Inspection Companies, the Claimant asserts, it would only have been able to calculate the number of certificates below the 10% Fee Cap after the end of each month, by which time it may have already exceeded the 10% Fee Cap.²⁹⁰

158. Second, the Claimant submits that the 10% Fee Cap was also rendered inapplicable by Argentina’s unilateral amendment of key terms of the Programme when it adopted the 2000-2001 Resolutions.²⁹¹ The Claimant points out that through the 2000-2001 Resolutions the AFIP excluded a number of goods from the scope of the Programme, effectively modifying the basis for calculating the Claimant’s fees under the Contract.²⁹² According to the Claimant, the reduced scope of goods subject to the Programme caused a significant reduction to the level of fees earnable by and payable to the Inspection Companies, and consequently, the level of the 10% Fee Cap.²⁹³ As a result, the Claimant alleges that the application of the 10% Fee Cap was rendered unlawful.²⁹⁴

159. Third, the Claimant alleges that its claim for the amounts in excess of the 10% Fee Cap is not precluded by the fact that the Claimant failed to formally challenge the imposition of the 10% Fee Cap through administrative appeals, as the Respondent alleges.²⁹⁵ The Claimant submits that there is no such requirement under Argentine law.²⁹⁶ In this respect, the Claimant notes that the Petracca case, on which the Respondent relies, determined that this requirement applies with respect to “administrative acts” within the terms of the LPA.²⁹⁷ Relying on the opinion of its expert, Dr. Bianchi, the Claimant contends that Argentina’s purported imposition of the 10% Fee Cap “do[es] not meet the requirements set forth in Section 7 of the LPA”, and thus, does not

²⁸⁸ Hearing Tr., Day 7 (14 April 2021), 1025:23-1026:1. ↩

²⁸⁹ Hearing Tr., Day 7 (14 April 2021), 1024:21-1025:17, 1027:19-1028:1; Hearing Tr., Day 2 (7 April 2021), 285:23-286:24. ↩

²⁹⁰ Hearing Tr., Day 7 (14 April 2021), 1028:2-10; Hearing Tr., Day 3 (8 April 2021), 464:2-12. ↩

²⁹¹ Statement of Claim, para. 182; Reply, paras. 32-34; First Bianchi Report, paras. 54, 58. ↩

²⁹² Statement of Claim, para. 182; Reply, paras. 32-34; First Bianchi Report, paras. 54, 58. ↩

²⁹³ Statement of Claim, para. 69; Reply, para. 15. ↩

²⁹⁴ Statement of Claim, para. 182; Reply, paras. 32-34; First Bianchi Report, paras. 54, 58. ↩

²⁹⁵ Reply, paras. 25-28; Hearing Tr., Day 7 (14 April 2021), 1070:16-1072:7. ↩

²⁹⁶ Reply, para. 26. ↩

²⁹⁷ Reply, para. 26; Second Bianchi Report, paras. 56-61; Petracca e Hijos, S. A. et al. v. National government -Ente Autárquico Mundial 78, Federal Court of Appeals in Administrative Matters sitting in full bench, Judgement, 24 April 1986, L.L., 1986-D-10 (RLA-113). ↩

[Page 58]

constitute an “administrative act” under the LPA.²⁹⁸ In addition, the Claimant alleges that the Petracca case “would not apply to the current questions of [...] ongoing contractual performance.”²⁹⁹ In any event, the Claimant contends that such requirement would be inconsistent with Article 2(2) of the Treaty.³⁰⁰

160. Fourth, the Claimant reiterates that the issuance of invoices below the 10% Fee Cap while the Programme was ongoing does not affect its right to claim the amounts in excess of that limit in this arbitration.³⁰¹ The Claimant reiterates that it had no choice but to comply with Argentina’s demands and issue capped invoices, as the Respondent would not otherwise make even partial payment of the Claimant’s fees. Moreover, the Claimant underlines that, when issuing invoices for capped amounts, it reserved its right to claim the amount over the 10% Fee Cap.³⁰²

161. On the basis of the foregoing, the Claimant submits that the Respondent’s conduct pertaining to the 10% Fee Cap breached the four standards provided for in Article 2(2) of the Treaty.³⁰³

162. First, the Claimant claims that the Respondent breached the FET standard by frustrating the Claimant’s legitimate expectations that the Respondent would administer the Programme in accordance with the Contract and Argentine law, and honour its payment obligations thereunder.³⁰⁴ The Claimant also submits that the Respondent breached the FET standard by “acting inconsistently and unreasonably by failing to implement an adequate selection system, instead requiring the Claimant to perform Ordinary Services on a much larger scale than envisaged by the Contract and then refusing to compensate the Claimant for the services it performed”.³⁰⁵ According to the Claimant, the Respondent likewise unjustly enriched itself by

²⁹⁸ Reply, para. 26; Second Bianchi Report, paras. 56-57; Section 7 of the Administrative Procedure Act (ABB-56). ↩

²⁹⁹ Hearing Tr., Day 1 (6 April 2021), 59:10-19. ↩

³⁰⁰ Hearing Tr., Day 1 (6 April 2021), 36:20-37:12, 58:20-59:9; Link-Trading Joint Stock Company v. Department for Customs Control of the Republic of Moldova, UNCITRAL, Award, 18 April 2002 (CLA-144); Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Award, 13 November 2000 (CLA-164); Luigiterzo Bosca v. Lithuania, UNCITRAL, Award, 17 May 2013 (CLA-145). ↩

³⁰¹ Hearing Tr., Day 7 (14 April 2021), 1028:23-1030:18. ↩

³⁰² Hearing Tr., Day 7 (14 April 2021), 1028:23-1029:25; Hearing Tr., Day 2 (7 April 2021), 181:21-183:3. ↩

³⁰³ Statement of Claim, para. 184. ↩

³⁰⁴ Statement of Claim, para. 184(a)(i)-(ii); Hearing Tr., Day 1 (6 April 2021), 28:16-24. ↩

³⁰⁵ Statement of Claim, para. 184(a)(iii). ↩

[Page 59]

benefiting from the additional auditing services the Claimant provided while refusing to compensate such services.³⁰⁶

163. Second, the Claimant submits that the Respondent’s conduct pertaining to the 10% Fee Cap constitutes an unreasonable measure which impairs the Claimant’s management, maintenance, use, enjoyment and disposal of its investment.³⁰⁷

164. Third, the Claimant maintains that the Respondent failed to protect the Claimant’s legal rights under the Contract, and therefore, breached its obligation to afford the Claimant’s investment full protection and security.³⁰⁸

165. Fourth, the Claimant asserts that the Respondent breached the Umbrella Clause by failing to observe its obligations vis-à-vis the Claimant, arising under the Contract.³⁰⁹

(b) The Respondent's Position

166. The Respondent submits that the application of the 10% Fee Cap was in accordance with the terms of the Contract agreed by the Claimant, and in particular Clauses 3 and 6, which stated that the Claimant’s fees would “in no case” exceed the 10% Fee Cap and that the Claimant had to “make the necessary arrangements to comply with randomized checks, ‘always ensuring that the relevant values do not form a base which might exceed the maximum fees.’”³¹⁰ For the Respondent, the Claimant’s claims thus run counter to pacta sunt servanda and good faith.³¹¹

167. The Respondent maintains that neither the alleged failure to implement a selection system nor the 2000-2001 Resolutions entitle the Claimant to an exemption from the 10% Fee Cap.³¹²

³⁰⁶ Statement of Claim, para. 184(a)(iv). ↩

³⁰⁷ Statement of Claim, para. 184(b). ↩

³⁰⁸ Statement of Claim, para. 184(c). ↩

³⁰⁹ Statement of Claim, para. 184(d); Hearing Tr., Day 1 (6 April 2021), 20:19-23. ↩

³¹⁰ Rejoinder, paras. 64, 252, 268, 281, 295; Contract, Clauses 3, 6 (C-2); Hearing Tr., Day 1 (6 April 2021), 81:3-83:22. ↩

³¹¹ Statement of Defence, paras. 77-94; Rejoinder, para. 63. ↩

³¹² Rejoinder, paras. 84-86, 92-97. ↩

[Page 60]

168. First, the Respondent contends that it did not have an obligation to implement a selection system under the Contract.³¹³ Rather, the Respondent asserts that pursuant to Clauses 3, 6 and 8 of the Contract “the Auditor had the exclusive responsibility of providing the audit system.”³¹⁴

169. The Respondent avers that, even though it was impossible to know at the beginning of each quarter which would be the upcoming import flows covered by the Programme,³¹⁵ the Claimant was better positioned than the Committee to estimate the number of audits that would be below the 10% Fee Cap.³¹⁶ In this respect, the Respondent contends that the Claimant represented on multiple occasions that it “had sufficient means and experience to meet the 10% fee cap”, including at the time of its proposal for Tender No. 13/97 and in the Audit Manual prepared by the Claimant.³¹⁷ In particular, the Respondent points out that the Audit Manual provided that operations to be audited could be selected either pursuant to the instructions of MECON or by means of an algorithm or based on the value of the operations.³¹⁸ The Respondent further asserts that the Claimant held its own statistics and had the right to access the databases of the Inspection Companies and the Committee.³¹⁹

170. The Respondent asserts that under Clause 8 of the Contract its obligation with respect to the selection system was limited to establishing a selection criteria.³²⁰ Thus, in its view, the Claimant could not have had the legitimate expectation that the Respondent would provide a selection system that would guarantee observance of the 10% Fee Cap.³²¹ The Respondent notes that Dr. Alberto B. Bianchi, the Claimant’s expert of Argentine law, confirmed that the Committee’s obligation under Clause 8 was to establish a “criterion for the selection” and that the selection system did not have to guarantee compliance with the 10% Fee Cap.³²²

³¹³ Hearing Tr., Day 1 (6 April 2021), 82:6-8. ↩

³¹⁴ Hearing Tr., Day 1 (6 April 2021), 82:6-84:23. ↩

³¹⁵ Hearing Tr., Day 7 (14 April 2021), 1152:5-12. ↩

³¹⁶ Hearing Tr., Day 7 (14 April 2021), 1109:10-1110:10. ↩

³¹⁷ Statement of Defence, paras. 95-108; Rejoinder, paras. 66-71. ↩

³¹⁸ Rejoinder, para. 68; Procedure Manual of the Programme for the Auditing of Pre-Shipment Inspection Certificates prepared by Claimant, 23 December 1997, Section I – General Procedures (R-148). ↩

³¹⁹ Hearing Tr., Day 7 (14 April 2021), 1109:10-1110:10; Hearing Tr., Day 1 (6 April 2021), 149:16-22; Hearing Tr., Day 2 (7 April 2021), 164:22-166:1. ↩

³²⁰ Hearing Tr., Day 7 (14 April 2021), 1151:24-1152:12. ↩

³²¹ Hearing Tr., Day 7 (14 April 2021), 1151:24-1152:12. ↩

³²² Hearing Tr., Day 7 (14 April 2021), 1107:18-1108:6; Hearing Tr., Day 3 (8 April 2021), 412:16-414:5, 411:7-19. ↩

[Page 61]

171. Second, it is the Respondent’s position that it appropriately established a selection criteria that enabled the Claimant to perform the services provided for in the Contract.³²³ The Respondent asserts that the Claimant acknowledged as much in its monthly reports addressed to the Committee and on its website, where it explained that its auditing services were triggered when a shipment was processed by customs through the “red channel” category (as per the criteria set forth in Resolution 396/97) that contained goods within the tariff classifications covered by the Programme.³²⁴ The Respondent further avers that Mr. Juan Santamaría, operations coordinator of the Claimant’s subsidiary in Argentina since 1998, also confirmed during the Hearing on the Merits that a selection criterion was indeed established by the Committee.³²⁵

172. Third, even if it were determined that it breached its alleged obligation to implement a selection system, the Respondent argues that the Claimant was still not entitled to fees above the 10% Fee Cap.³²⁶ The Respondent contends that the implementation of a selection system was not a “condition precedent” for the application of the 10% Fee Cap.³²⁷ Rather, the Respondent contends that, when properly interpreted, Clauses 3 and 6 of the Contract establish that the 10% Fee Cap was to be applied “regardless of the systems to be implemented”.³²⁸ Moreover, the Respondent argues that the “contractual breach exception” under Article 1201 of the Argentine Civil Code is not applicable in the instant case.³²⁹ The Respondent asserts that this exception only applies to ongoing contracts, and in the case of administrative contracts – such as the Contract at issue in this dispute - is limited to situations in which the “government’s non-compliance is of ‘such a serious type that they make it impossible to perform the contract.’”³³⁰ In any event, the Respondent contends that the application of the “contractual breach exception” would only have

³²³ Rejoinder, paras. 72-91, 253; Statement of Defence, para. 20; DGA Resolution No. 396/97, published in the Official Journal No. 28783, Section 1, 27 November 1997 (R-18); Hearing Tr., Day 1 (6 April 2021), 86:25-87:88:1. ↩

³²⁴ Rejoinder, paras. 75-82; ICS, Monthly Reports, December 1998, March 1999 – May 1999, July 1999 – March 2000, September 2000, December 2000, March 2001 – December 2001, Section 1.3 (C-73 – C-97); ICS, Monthly Report, May 1998, Section e), p. 4 (R-151); ICS, Monthly Report, June 1998, p. 3 (R-152); Snapshot of ICS’s website of April 2001, available at https://web.archive.org/web/*/http://icsinspections.com/ (R-147). ↩

³²⁵ Hearing Tr., Day 7 (14 April 2021), 1110:11-14; Hearing Tr., Day 2 (7 April 2021), 173:17-23. ↩

³²⁶ Statement of Defence, paras. 89-90; Rejoinder, paras. 84-87. ↩

³²⁷ Rejoinder, para. 86. ↩

³²⁸ Rejoinder, paras. 65, 86; Second Comadira Report, paras. 15-16, 43-45; Hearing Tr., Day 7 (14 April 2021), 1105:17-1108:17. ↩

³²⁹ Statement of Defence, paras. 83-94; Rejoinder, para. 84; Second Comadira Report, paras. 34-35; Hearing Tr., Day 1 (6 April 2021), 85:2-86:14. ↩

³³⁰ Statement of Defence, paras. 85, 91-92; First Comadira Report, para. 85. ↩

[Page 62]

“entitled Claimant to refuse to provide the service until the obligations allegedly infringed were fulfilled, and to nothing else”.³³¹

173. Fourth, the Respondent argues that the Claimant accepted the application of the 10% Fee Cap by failing to challenge the validity of this limitation since it started to be applied by the Committee in 1998 through the available administrative and judicial procedures.³³² The Respondent alleges that the Claimant did not voice any reservations pertaining to the application of the 10% Fee Cap throughout the term of the Programme and until after the termination of the Programme in January 2002, including in respect of periods that had already been invoiced and paid for.³³³ For the Respondent, in accordance with the Petracca doctrine, the Claimant was required to have challenged the application of the 10% Fee Cap within the 90-day limit of the LPA (i.e., in 1998).³³⁴

174. Fifth, the Respondent asserts that the Claimant accepted Argentina’s authority to determine which goods would be covered under the Programme, and thus, the 2000-2001 Resolutions cannot affect the validity of the 10% Fee Cap.³³⁵ The Respondent argues that the terms and conditions of the Tender No. 13/97 implied knowledge and acceptance of all conditions involved in the contract.³³⁶ Part of those terms and conditions, the Respondent asserts, was MECON’s and subsequently AFIP’s authority as per Decree 477/97 and Resolution 118/2000, respectively, to determine the scope of the goods under the Programme.³³⁷ The Respondent stresses that this was never questioned by the Claimant, who noted the changes in the scope of the Programme in its monthly reports without expressing any disagreement.³³⁸

³³¹ Statement of Defence, para. 89; Rejoinder, para. 84; Second Comadira Report, paras. 34-35. ↩

³³² Statement of Defence, paras. 109-116; Rejoinder, para. 88. ↩

³³³ Statement of Defence, para. 114; Rejoinder, para. 51; Hearing Tr., Day 7 (14 April 2021), 1111:14-1112:3. ↩

³³⁴ Statement of Defence, para. 111; Rejoinder, para. 88; Petracca e Hijos, S. A. et al. v. Gobierno nacional - Ente Autárquico Mundial 78, Federal Court of Appeal in Administrative Matters sitting in full bench, Judgment, 24 April 1986, L.L., 1986-D-10 (RLA-113). ↩

³³⁵ Rejoinder, paras. 92-97; Hearing Tr., Day 1 (6 April 2021), 88:2-19. ↩

³³⁶ Rejoinder, para. 93; MECON, Call for Public Tender No. 13/97, 7 August 1997, attaching Terms and Conditions (C-9). ↩

³³⁷ Rejoinder, paras. 94-95; Decree 477/97 (R-15); MECON, Resolution No. 118/200, 23 February 2000 (R-165). ↩

³³⁸ Rejoinder, para. 96; ICS, Monthly Audit Report, September 2000, Section 1.3, preliminary explanations, p. 6 (C-86). ↩

[Page 63]

2. Conversion of U.S. dollar-denominated invoices into Pesos

(a) The Claimant's Position

175. The Claimant submits that the Respondent breached Article 2(2) of the Treaty by failing to pay the Claimant’s U.S. dollar invoices in full and demanding that the Claimant re-issue the invoices in Pesos using the historic 1:1 exchange rate.³³⁹ According to the Claimant, the Respondent then only settled the re-issued invoices years later, when the Peso had devalued substantially so that the Claimant only received a small fraction of the value to which it was entitled pursuant to the Contract.³⁴⁰ It is the Claimant’s submission that the balance that remains outstanding on account of the forced re-issuance of invoices in Pesos is USD 3,375,289.01.³⁴¹ The Claimant maintains that such conduct is contrary to Argentine law and the Contract, and thereby breaches the Treaty as well.³⁴²

176. The Claimant maintains that it had the right to accrue its fees and issue invoices for the services performed under the Contract in U.S. dollars.³⁴³ The Claimant observes that pursuant to Clause 3 of the Contract, as amended by Resolution 1106/98, the Claimant was entitled to be compensated for its auditing services with fees equivalent to 0.64% (and later 0.76%) of the FOB, FOR, or FOT value declared on each audited Inspection Certificate.³⁴⁴ According to the Claimant, since the value declared on Inspection Certificates was either expressed in U.S. dollars or accompanied by a U.S. Dollar exchange rate, it was entitled to fees invoiced in the same currency.³⁴⁵ The Claimant asserts that, after fixing the value of its fees in U.S. dollars, the Respondent had to provide the respective payment either in U.S. dollars or in the equivalent value in Pesos by applying the relevant U.S. Dollar-Peso exchange rate in effect at the time the invoice was paid.³⁴⁶

177. The Claimant refers to a number of additional documents that, in its view, further evidence its right to accrue its fees in U.S. dollars, in particular: (i) Decree 477/97 and the Tender Terms and

³³⁹ Statement of Claim, para. 193; Reply, para. 37. ↩

³⁴⁰ Statement of Claim, paras. 188-189, 192. ↩

³⁴¹ Reply, para. 47; Second Dellepiane Report, p. 29. ↩

³⁴² Reply, para. 8 ↩

³⁴³ Reply, paras. 35, 40-43. ↩

³⁴⁴ Statement of Claim, para. 185; Reply, para. 35; Hearing Tr., Day 1 (6 April 2021), 46:22-48:1. ↩

³⁴⁵ Reply, para. 35; Second Bianchi Report, paras. 12(i)-(ii), 85, 89, 96; Contract, Clause 19 (C-2); Hearing Tr., Day 1 (6 April 2021), 46:22-47:12; Hearing Tr., Day 7 (14 April 2021), 1041:23-1043:5. ↩

³⁴⁶ Reply, para. 36. ↩

[Page 64]

Conditions, both containing provisions on the Auditor’s fees similar to those in the Contract;³⁴⁷ (ii) Resolution 1106/98, which increased the Claimant’s fees without modifying the nature of their calculation;³⁴⁸ (iii) the Claimant’s monthly reports to the Committee, in which the value of the audited Inspection Certificates and its fees was recorded in U.S. Dollar;³⁴⁹ and (iv) a report issued by the Committee in November 1999, which recorded the value of the Inspection Certificates prepared under the Programme in U.S. dollars.³⁵⁰ The Claimant contends that while the Contract, the Tender Terms and Conditions and Decree 477/97 contain provisions that make reference to amounts in Pesos these do not concern the contractual amount, and thus, are irrelevant for determining the currency in which the Auditor was to invoice.³⁵¹

178. For the Claimant, its right to issue invoices in U.S. dollars under the Contract remained unaffected by the fact that the Claimant had previously issued invoices denominated in Pesos.³⁵² The Claimant argues that, until the enactment of the Emergency Law, “the currency in which invoices were issued and paid was of little significance”, since the U.S. dollar and the Peso were pegged at par.³⁵³ However, the Claimant submits that the rapid devaluation of the Peso vis-à-vis the U.S. dollar following the enactment of Emergency Law meant that the issuance of invoices in Pesos “could easily result in the Claimant receiving a different amount (and potentially a very different amount) than the amount to which it was contractually entitled”.³⁵⁴ The Claimant argues that under the Contract “any exchange rate risk was borne by Argentina, not the Claimant”.³⁵⁵ In this respect, the Claimant indicates that, by contrast to the contract Argentina concluded with the Inspection Companies, it did not include a provision in the Contract requiring the Claimant to issue its invoices in Pesos.³⁵⁶

³⁴⁷ Hearing Tr., Day 7 (14 April 2021), 1043:6-1044:16; Decree 477/97, Annex III(c)(9), Annex I(g)(II)(1)(C-6); MECON, Call for Public Tender No. 13/97, 7 August 1997, attaching Terms and Conditions, para. c.XI (C-9). ↩

³⁴⁸ Hearing Tr., Day 7 (14 April 2021), 1054:10-1057:6. ↩

³⁴⁹ Hearing Tr., Day 7 (14 April 2021), 1030:19-1034:2; December 1998 Monthly Audit Report (C-73); March 2001 Monthly Audit Report (C-88). ↩

³⁵⁰ Hearing Tr., Day 7 (14 April 2021), 1034:3-1035:9; Report of the Committee of November 1999 (R-20). ↩

³⁵¹ Hearing Tr., Day 7 (14 April 2021), 1045:2-1046:21. ↩

³⁵² Statement of Claim, paras. 186-187; Reply, para. 41; Hearing Tr., Day 1 (6 April 2021), 48:18-24. ↩

³⁵³ Statement of Claim, paras. 186-187; Reply, para. 41. ↩

³⁵⁴ Reply, para. 42. ↩

³⁵⁵ Reply, para. 43. ↩

³⁵⁶ Reply, para. 43. ↩

[Page 65]

179. The Claimant further maintains that its right to invoice in U.S. dollars was not affected by the Emergency Law or Decree 214/02.³⁵⁷ According to the Claimant, the Emergency Law and Decree 214/02 only applied to “monetary obligations”.³⁵⁸ Given that the Claimant’s fees were established as the percentage of the value stated in the relevant Inspection Certificates or on the basis of market value, these obligations comprised “value obligations” under Argentine law, and therefore, fell outside of the scope of the Emergency Law and Decree 214/02.³⁵⁹ The Claimant emphasizes that this conclusion is consistent with a number of legal opinions issued by Argentina’s Directorate General of Legal Affairs (“DGAJ”).³⁶⁰ Additionally, the Claimant contends that the vast majority of its invoices were issued and became due and payable before the Emergency Law came into force.³⁶¹

180. The Claimant concludes that the Respondent’s conduct in respect of the alleged forced re-issuance of the Claimant’s invoices in Pesos breached the four obligations provided for in Article 2(2) of the Treaty.³⁶²

181. First, the Claimant claims that the Respondent breached the FET standard by failing to maintain a stable and predictable legal and business environment.³⁶³ The Claimant further asserts that the Respondent frustrated the Claimant’s legitimate expectations by (i) wrongfully applying the Emergency Law to value obligations beyond its scope of application;³⁶⁴ (ii) retroactively applying the Emergency Law in respect of rights and obligations which had accrued and crystallised before it came into force;³⁶⁵ and (iii) breaching its contractual obligations to pay the Claimant’s fees due under the Contract.³⁶⁶ The Claimant submits that the Respondent also breached the FET standard by “discriminating against the Claimant by pesifying the Claimant’s invoices on a 1:1 basis and not applying a Stabilisation Ratio (CER) as was Argentina’s usual practice in relation to its US

³⁵⁷ Statement of Claim, para. 190; Reply, paras. 44-47; Hearing Tr., Day 1 (6 April 2021), 53:1-54:6. ↩

³⁵⁸ Statement of Claim, para. 190; First Bianchi Report, Section VI and paras. 22, 80; Reply, para. 46; Hearing Tr., Day 1 (6 April 2021), 53:20-21. ↩

³⁵⁹ Statement of Claim, para. 190; First Bianchi Report, Section VI; Reply, para. 46; Second Bianchi Report, paras. 92-94; Hearing Tr., Day 1 (6 April 2021), 53:22-54:6. ↩

³⁶⁰ Statement of Claim, para. 190; DGAJ Opinions Nos. 9800, 10338, 13865 and 13957 (C-70). See also Hearing Tr., Day 1 (6 April 2021), 48:8-17. ↩

³⁶¹ Statement of Claim, para. 189. ↩

³⁶² Statement of Claim, para. 193; Reply, para. 102. ↩

³⁶³ Statement of Claim, para. 193(a)(i). ↩

³⁶⁴ Statement of Claim, para. 193(a)(i). ↩

³⁶⁵ Statement of Claim, para. 193(a)(ii). ↩

³⁶⁶ Statement of Claim, para. 193(a)(iv); Hearing Tr., Day 1 (6 April 2021), 28:10-15. ↩

[Page 66]

Dollar payment obligations”.³⁶⁷ In addition, the Claimant asserts that the Respondent acted “in an arbitrary and inconsistent manner as regards the treatment of the Claimant’s Ordinary Services invoices, as evidenced by the conflicting positions taken by MECON and the DGAJ”.³⁶⁸ According to the Claimant, the Respondent further unjustly enriched itself by benefitting from the auditing services performed by the Claimant while refusing to duly compensate the Claimant for these services.³⁶⁹

182. Second, the Claimant submits that the Respondent’s conduct pertaining to the conversion of dollar-denominated invoices into Pesos constitutes an unreasonable or discriminatory measure which impairs the Claimant’s management, maintenance, use, enjoyment and disposal of its investment.³⁷⁰

183. Third, the Claimant maintains that the Respondent breached its obligation to afford the Claimant’s investment FPS. The Claimant asserts that the Respondent failed to afford the Claimant’s investment a stable and secure commercial and legal environment, including by unlawfully applying the Emergency Law.³⁷¹

184. Fourthly, the Claimant asserts that the Respondent breached the Umbrella Clause by failing to observe its obligation under the Contract to pay the Claimant’s remaining balance in respect of the forced re-issuance of its invoices in Pesos.³⁷²

(b) The Respondent's Position

185. The Respondent submits that the conversion of U.S. dollar denominated invoices into Pesos was consistent with (i) the applicable legal framework;³⁷³ (ii) the Claimant’s conduct throughout the Programme;³⁷⁴ and (iii) the place in which the Claimant performed its services and incurred its costs.³⁷⁵

³⁶⁷ Statement of Claim, para. 193(a)(iii). ↩

³⁶⁸ Statement of Claim, para. 193(a)(v). ↩

³⁶⁹ Statement of Claim, para. 193(a)(vi). ↩

³⁷⁰ Statement of Claim, para. 193(b). ↩

³⁷¹ Statement of Claim, para. 193(c). ↩

³⁷² Statement of Claim, para. 193(d); Hearing Tr., Day 1 (6 April 2021), 20:9-18. ↩

³⁷³ Rejoinder, paras. 98, 100-108, 254, 268, 281, 294. ↩

³⁷⁴ Statement of Defence, paras. 133-141; Rejoinder, para. 99. ↩

³⁷⁵ Statement of Defence, paras. 142-147; Rejoinder, paras. 121-125. ↩

[Page 67]

186. First, the Respondent maintains that, pursuant to the legal framework applicable to the auditing services, the fees for the services provided under the Contract were accrued in Pesos and “ICS had to issue peso-denominated invoices”.³⁷⁶ The Respondent asserts that, in accordance with Resolution 1106/98 and Clause 3 of the Contract, the Claimant’s fees “were calculated by reference to the fees invoiced by the inspection companies, which were under an obligation to issue peso-denominated invoices.”³⁷⁷ The Respondent recalls that Resolution 1106/98 established that the Claimant’s fees amounted to “EIGHTY PERCENT (80%) of the fees received by the Inspection companies for each audited Inspection certificate”.³⁷⁸ The Respondent also points out that Clause 3 of the Contract provided that the Claimant’s fees could not exceed 10% of the “amount invoiced by the inspection companies”.³⁷⁹ With respect to the fees of the Inspection Companies, the Respondent avers that, pursuant to the Committee’s Operative Notices Nos. 2 and 3 of 19 March 1998 and 28 June 2001, monthly invoices for import pre-shipment inspection services had to be submitted to AFIP in Pesos.³⁸⁰ The Respondent underlines that the Operative Notice No. 2 was issued six months prior to Resolution 1106/98, such that when the resolution refers to the fees charged by the inspection companies, “there was no doubt that it made reference to fees—those of the inspection company—accrued, invoiced and received in pesos.”³⁸¹

187. According to the Respondent, all of the foregoing is confirmed by the testimony of Ángela Cupello and Amelia Acosta, former officers of AFIP involved in processing the payments in connection with the Programme, who also note that interest accrued in Pesos.³⁸² The Respondent adds that (i) the Tender Terms and Conditions and Contract both stipulated that payments would be made in Pesos; (ii) the bid bond had to be denominated in Pesos; and (iii) the performance bond was denominated in Pesos.³⁸³

³⁷⁶ Statement of Defence, para. 130; Rejoinder, paras. 96, 101, 254; Hearing Tr., Day 7 (14 April 2021), 1095:18-1103:10. ↩

³⁷⁷ Rejoinder, paras. 101, 254; Resolution 1106/98 (C-8); Contract, Clause 3 (C-2); Hearing Tr., Day 1 (6 April 2021), 89:3-22. ↩

³⁷⁸ Rejoinder, para. 100; Resolution 1106/98 (C-8). ↩

³⁷⁹ Rejoinder, para. 100; Contract, Clause 3 (C-2). ↩

³⁸⁰ Statement of Defence, paras. 128-129; Rejoinder, paras. 102-103; Executive Committee Operative Notice No. 2/1998, 19 March 1998 (R-32); Executive Committee’s Order No. 3/2001, 28 June 2001 (R-33). ↩

³⁸¹ Rejoinder, para. 103. ↩

³⁸² Statement of Defence, para. 136; Rejoinder, para. 104; Acosta First Witness Statement, paras. 23-24; Acosta Second Witness Statement; para. 5; Cupello Second Witness Statement, paras. 4-7. See also Hearing Tr., Day 3 (8 April 2021), 371:9-372-1. ↩

³⁸³ Statement of Defence, paras. 125-127, 130; Decree 477/97, Annex III, Sections (c)(V), (e)(VI), (f)(10)(1) (R-15); Contract, Clause 19 (C-2). ↩

[Page 68]

188. Second, the Respondent submits that the Claimant’s claims concerning the alleged forced conversion of dollar denominated invoices into Pesos is at odds with the Claimant’s own issuance of invoices denominated in Pesos while the Contract was in force.³⁸⁴ Consequently, the Respondent notes that it had consistently settled the Claimant’s invoices in Pesos.³⁸⁵ It was only upon the expiration of the Contract, the Respondent contends, that the Claimant decided to change course and submit a large number of dollar-denominated invoices.³⁸⁶

189. Third, the Respondent avers that invoicing in Pesos was in line with the place in which the Claimant performed its services and incurred its costs.³⁸⁷ As indicated by the Tender Terms and Conditions, the on-site inspections carried out by the Claimant had to be performed at the point of destination of the relevant goods (i.e., Argentine territory).³⁸⁸ Moreover, the Respondent affirms that Claimant’s costs were substantially denominated in Pesos, as evidenced by its financial statements.³⁸⁹ In light of these circumstances, the Respondent contends, the issuance by the Claimant of invoices denominated in U.S. dollars “makes no sense from an economic standpoint”.³⁹⁰

190. Finally, according to the Respondent, the enactment of the Emergency Law and Decree 214/02 was irrelevant as the payment obligations under the Contract were already set in Pesos.³⁹¹ In any event, the Respondent submits that the payments owed by the Respondent’s under the Contract were obligations to pay sums of money—as opposed to value obligations—given that they concerned amounts that were exactly determined at the end of each month in which the services were rendered.³⁹² In this regard, the Respondent contends that the opinions of the Directorate General of Legal Affairs relied upon by the Claimant should be disregarded.³⁹³ The Respondent

³⁸⁴ Statement of Defence, paras. 133-134; Rejoinder, paras. 99, 254; Hearing Tr., Day 1 (6 April 2021), 91:1-10. ↩

³⁸⁵ Statement of Defence, paras. 136-141; Cupello First Statement, paras. 14-15; Acosta First Statement, paras. 25-27. ↩

³⁸⁶ Rejoinder, para. 99. ↩

³⁸⁷ Statement of Defence, para. 134; Rejoinder, para. 99; Hearing Tr., Day 1 (6 April 2021), 90:3-20. ↩

³⁸⁸ Statement of Defence, paras. 143-144; Rejoinder, para. 122; Decree 477/97, Annex III, Section (c)(VIII) (R-16). ↩

³⁸⁹ Rejoinder, para. 122; First Dapena Report, paras. 33-35. ↩

³⁹⁰ Rejoinder, para. 125. ↩

³⁹¹ Statement of Defence, paras. 148-155; Comadira First Report, paras. 104, 110-111, 115; Rejoinder, paras. 109, 254; Comadira Second Report, para. 114. ↩

³⁹² Rejoinder, para. 111; Comadira Second Report, paras. 118-120. ↩

³⁹³ Rejoinder, para. 112. See also Statement of Claim, para. 190; Directorate General of Legal Affairs, Opinions: No. 9800 (File No. 0286419/02), 13 February 2003; No. 10338 (File No. 0176433/02), 11 ↩

[Page 69]

argues that these were in fact opinions of Yolanda M. Eggink, a former MECON official, which “were never documented by way of an administrative act recognizing them as binding upon the State and were disregarded by the Legal Department of the Ministry of Economy”.³⁹⁴ The Respondent stresses that Mrs. Eggink was sentenced to three years of imprisonment “for having favoured business owners to the detriment of the Argentine State by unlawfully recognizing peso/dollar-denominated claims in their favour.”³⁹⁵

3. Application of Decree 1060/01

(a) The Claimant's Position

191. The Claimant submits that the Respondent breached Article 2(2) of the Treaty by unlawfully applying Decree 1060/01 pursuant to which the Respondent demanded a 13% reduction of the Claimant’s fees.³⁹⁶

192. The Claimant points out that Decree 1060/01 of 24 August 2001 expressly required the Respondent “to request a service provider’s consent to the 13% reduction at the time when the services in question were actively being provided”.³⁹⁷ If the service provider’s consent was not given, the Claimant asserts that the Respondent could either: (i) terminate the relevant contract; or (ii) reduce the level of services being provided thereunder so as to reduce the level of fees accordingly.³⁹⁸ According to the Claimant, this process was not followed: the Respondent never sought or obtained the Claimant’s consent to reduce its fees or reduced the level of the Claimant’s services at any time.³⁹⁹ Rather, the Claimant argues that it was only in June 2003 and September and October 2004, “years after the Claimant had provided the relevant services”, that the Respondent sought a retroactive reduction of the Claimant’s fees in purported application of Decree 1060/01.⁴⁰⁰

³⁹⁴ February 2003; No. 13865 (File No. 0286419/02), and 13957 (File No. 0176433/02), 1 September 2003 (C-70). ↩

Rejoinder, para. 112.

³⁹⁵ Rejoinder, para. 113; Federal Court of Cassation in Criminal Matters, Panel IV, “MELLER, Sergio E. y otros s/recurso de casación” (Case No. 9618/2001/TO1/CFC6), Judgment, 24 October 2018 (R-291). ↩

³⁹⁶ Statement of Claim, para. 197; Reply, para. 8. ↩

³⁹⁷ Reply, para. 54; Second Bianchi Report, paras. 103-107. ↩

³⁹⁸ Reply, para. 54; Second Bianchi Report, para. 107. ↩

³⁹⁹ Reply, para. 54; Hearing Tr., Day 1 (6 April 2021), 61:4-6. ↩

⁴⁰⁰ Reply, para. 54; Hearing Tr., Day 1 (6 April 2021), 59:20-60:1; Hearing Tr., Day 7 (14 April 2021), 1036:5-18. ↩

[Page 70]

193. The Claimant underscores that while it eventually complied with the Respondent’s demand and reissued reduced invoices, it only did so given that otherwise “no payment whatsoever would be forthcoming by Argentina in respect of the relevant invoices.”⁴⁰¹ In any event, the Claimant argues that it reserved all its rights in this respect when it filed its expanded administrative claim.⁴⁰²

194. In addition, the Claimant argues that the fact that it continued providing the services after the expiry of the Contract in March 2001 did not entail a tacit acceptance of the 13% reduction established in Decree 1060/01.⁴⁰³ Relying on the opinion of Prof. Bianchi, the Claimant submits that the “behavior of both parties suggests that they continued their existing contractual relationship by mutual agreement, with the same rights and obligations that existed before that date under the Contract” until the termination of the Programme in February 2002.⁴⁰⁴ Throughout this additional period the Claimant says that the Respondent continued to request, and the Claimant continued to provide, services under the terms agreed in the Contract.⁴⁰⁵ The Claimant contends that it had previously done the same thing following the expiry of the original period of the Contract in March 2000 and until its retroactive one-year extension until March 2001.⁴⁰⁶ According to the Claimant, the Respondent has acknowledged that the only reason why the Contract was not formally extended again was because there was not enough time to complete a new bidding process before the termination of the Programme.⁴⁰⁷

195. The Claimant disputes the Respondent’s assertion that the payments for the services provided after the Contract expired (i.e., from April to December 2001) were made on the basis of the principle of unjust enrichment.⁴⁰⁸ If that would have been the case, the Claimant contends, the Claimant “would only have been entitled to receive expenses and no profits.”⁴⁰⁹ According to the

⁴⁰¹ Reply, paras. 48, 55. ↩

⁴⁰² Reply, para. 48. ↩

⁴⁰³ Reply, paras. 50-53. ↩

⁴⁰⁴ Reply, para. 53; Second Bianchi Report, para. 122. ↩

⁴⁰⁵ Reply, para. 52; Second Santamaria Statement, para. 14; Hearing Tr., Day 1 (6 April 2021), 60:12-16. ↩

⁴⁰⁶ Reply, para. 52; Second Santamaria Statement, para. 14; Decision of the Committee No. 002, 2 March 2001, Article 1 (C-20). ↩

⁴⁰⁷ Reply, para. 52; Resolution No. 325/2006 (C-60); Hearing Tr., Day 1 (6 April 2021), 60:17-61:6. ↩

⁴⁰⁸ Hearing Tr., Day 7 (14 April 2021), 1072:8-1075:5. ↩

⁴⁰⁹ Hearing Tr., Day 7 (14 April 2021), 1072:22-1073:12. ↩

[Page 71]

Claimant, this was not the case as the Claimant continued “to be paid in accordance with its entitlement under Decree 477/97 and the Contract.”⁴¹⁰

196. In light of the foregoing, the Claimant concludes that the 13% reduction of its invoices breached the four obligations provided for in Article 2(2) of the Treaty.⁴¹¹

197. First, the Claimant claims that the Respondent breached the FET standard by frustrating the Claimant’s legitimate expectations that the Respondent would (i) comply with its national laws, and not wrongfully apply Decree 1060/01;⁴¹² (ii) comply with its obligations vis-à-vis the Claimant under the Contract;⁴¹³ and (iii) not unjustly enrich itself by benefitting from the auditing services performed by the Claimant while refusing to duly compensate the Claimant for these services.⁴¹⁴

198. Second, the Claimant submits that the Respondent’s conduct pertaining to the 13% reduction of the Claimant’s invoices constitutes an unreasonable measure which impairs the Claimant’s management, maintenance, use, enjoyment and disposal of its investment.⁴¹⁵

199. Third, the Claimant maintains that the Respondent breached its obligation to afford the Claimant’s investment full protection and security, by failing to protect the Claimant’s legal rights.⁴¹⁶

200. Fourth, the Claimant asserts that the Respondent breached the Umbrella Clause by failing to observe its obligation to pay the Claimant’s fees due under the Contract.⁴¹⁷

(b) The Respondent's Position

201. The Respondent submits that the 13% reduction provided for in Decree 1060/01 was properly applied to the Claimant, and thus, did not breach Article 2(2) of the Treaty.⁴¹⁸

⁴¹⁰ Hearing Tr., Day 7 (14 April 2021), 1073:13-19. ↩

⁴¹¹ Statement of Claim, para. 197. ↩

⁴¹² Statement of Claim, para. 197(a)(i); Hearing Tr., Day 1 (6 April 2021), 29:1-9. ↩

⁴¹³ Statement of Claim, para. 197(a)(ii). ↩

⁴¹⁴ Statement of Claim, para. 197(a)(iii). ↩

⁴¹⁵ Statement of Claim, para. 197(b). ↩

⁴¹⁶ Statement of Claim, para. 197(c). ↩

⁴¹⁷ Statement of Claim, para. 197(d); Hearing Tr., Day 1 (6 April 2021), 21:1-3. ↩

⁴¹⁸ Statement of Defence, paras. 162-171; Rejoinder, paras. 126-145, 255, 268, 281, 294. ↩

[Page 72]

202. The Respondent asserts that Decree 1060/01 (in force as from 1 July 2001 and adopted in accordance with Article 34 of Law No. 24,156, as amended by Law No. 25,453) established that the Government had the authority to reduce public expenses in view of available budgetary resources.⁴¹⁹ Relying on the expert evidence of Prof. Julio Pablo Comadira, its expert on Argentine law, the Respondent notes that although Decree 1060/01 required to request a service provider’s consent when there was an ongoing contractual relation, it did not do so in the absence of a contract.⁴²⁰ According to the Respondent, Law No. 24,156 formed part of the legal framework governing government procurement which was applicable to the participants of the Tender 13/97, as duly noted in the Tender Terms and Conditions.⁴²¹

203. The Respondent also submits that the Claimant consented to the application of Decree 1060/01 in respect of the services provided from July to December 2001.⁴²² Relying on the opinions of Profs. Comadira and Dapena, the Respondent argues that the Claimant’s decision to continue providing its auditing services after the Contract was no longer in force “meant consenting to the applicable regulations, especially Presidential Decree No. 1060/2001.”⁴²³ Otherwise, the Respondent contends, the Claimant would have had to cease provision of its services.⁴²⁴ Moreover, the Respondent argues that, when the Claimant submitted the respective credit notes applying the 13% reduction, the Claimant failed to make any observations or reservations.⁴²⁵ In this connection, the Respondent notes that the Argentine Supreme Court has held that “the interested parties’ voluntary submission to a given legal framework, without making any express reservation, renders their subsequent challenge inadmissible.”⁴²⁶ The Respondent further avers that the applicability of Decree 1060/01 was confirmed by Opinion No. 20484 of the General

⁴¹⁹ Statement of Defence, paras. 162-163; Rejoinder, paras. 127, 255; Decree 1060/01, 22 August 2001, Articles 1 and 4 (C-50); Law No. 25,453, 30 July 2001, Article 10 (replacing Article 34 of Law No. 24,156) (R-40). ↩

⁴²⁰ Hearing Tr., Day 7 (14 April 2021), 1115:22-1116:9; Hearing Tr., Day 4 (9 April 2021), 631:14-25. ↩

⁴²¹ Rejoinder, para. 128; Decree 477/97, 22 May 1997, Annex III, Section (d)(I) (R-15). ↩

⁴²² Statement of Defence, paras. 166-168; First Comadira Report, para. 143; Rejoinder, paras. 133, 255, 268. ↩

⁴²³ Statement of Defence, para. 167; Comadira First Report, para. 143; First Dapena Report, para. 57. ↩

⁴²⁴ Statement of Defence, para. 166; Rejoinder, para. 133. ↩

⁴²⁵ Rejoinder, para. 130; Letter from the Committee No. 279/04 to the Claimant, 6 October 2004, and Letter from ICS to the Committee No. ICS/C/18826/04, 7 December 2004 (R-145). ↩

⁴²⁶ Rejoinder, para. 132; Argentine Supreme Court of Justice, “Cabrera, Gerónimo Rafael y otro c/ P.E.N. - ley 25.561 - dtos. 1570/01 y 214/02 s/ amparo sobre ley 25.561”, Judgment, 13 July 2004, Judgments: 327:2905, recital no. 5 (RLA-287). ↩

[Page 73]

Directorate for Legal Affairs of the Ministry of Economy and the testimony of Ms. Acosta, a former AFIP official responsible for approving the payments related to the Programme.⁴²⁷

204. The Respondent argues that the rules governing government procurement in Argentina are of public order, such that an administrative contract that has expired cannot be implicitly extended, especially in a manner contrary to the terms of Decree 1060/01.⁴²⁸ Thus, according to the Respondent, the de facto situation that emerged after the expiry of the Contract cannot be considered an ongoing contractual relationship subject to the procedures and consent requirements of Decree 1060/01.⁴²⁹ The Respondent alleges that it was precisely because of this lack of a contractual basis that AFIP had to settle the payments for the services provided from July to December 2001 as “equitable payments” on the basis of Resolution 325.⁴³⁰

205. Moreover, considering that there was no contract in force from July to December 2001, the Respondent argues that the Claimant could not have been put in a better situation than those providers that did have a contract with the Argentine government.⁴³¹

4. Payment for special services

(a) The Claimant's Position

206. The Claimant submits that the Respondent breached the obligations provided for in Article 2(2) of the Treaty by failing to compensate the Claimant for the work it performed in connection with the “special services” in breach of the Contract and Argentine law.⁴³²

207. The Claimant alleges that, between June 1998 and July 2001, the Respondent requested and the Claimant prepared and issued the 21 special reports of issues of specific interest to Argentina (see paragraphs 76-77 above).⁴³³ The Claimant contends that these special services were distinct from the ordinary services relating to the review of inspection certificates.⁴³⁴ In this respect, the

⁴²⁷ Statement of Defence, para. 165; Rejoinder, para. 129; Second Acosta Statement, paras. 9-10. ↩

⁴²⁸ Rejoinder, paras. 136-137; Second Comadira Report, paras. 134-140. ↩

⁴²⁹ Statement of Defence, para. 170; First Comadira Report, paras. 151-153; Rejoinder, paras. 135-136; Second Comadira Report, paras. 132-133. ↩

⁴³⁰ Rejoinder, para. 137; Second Comadira Report, paras. 143-145. See also Hearing Tr., Day 2 (7 April 2021), 320:4-19. ↩

⁴³¹ Hearing Tr., Day 1 (6 April 2021), 93:4-10. ↩

⁴³² Statement of Claim, para. 202; Reply, para. 8. ↩

⁴³³ Statement of Claim, para. 73; Reply, para. 57; Hearing Tr., Day 1 (6 April 2021), 61:7-15. ↩

⁴³⁴ Reply, para. 58. ↩

[Page 74]

Claimant asserts that Clauses 6, 8 and 9 of the Contract stipulated that the Claimant "was obliged to comply with the Respondent's instructions which could and did include instructions to carry out Special Services.”⁴³⁵

208. The Claimant asserts that the special services required performing different types of tasks than those undertaken for the ordinary services.⁴³⁶ In support of this contention, the Claimant refers to the evidence provided by Mr. Juan Santamaría,⁴³⁷ operations coordinator of the Claimant's subsidiary in Argentina since 1998, and Dr. Julio Pablo Comadira, the Respondent's expert on Argentine law.⁴³⁸ The Claimant explains that ordinary services entailed reviewing a specific import by conducting a physical inspection of the shipment upon arrival in Argentina and subsequently checking that the Inspection Certificate was consistent with that inspection.⁴³⁹ By contrast, the special services pertained to more extensive tasks such as conducting market analysis, assessing the implementation of other trade programmes and examining the prices of goods imported to the country after they had been cleared from customs.⁴⁴⁰

209. According to the Claimant, these special services were to be paid on the basis of the second sentence of Article 2 of Resolution 1106/98, which established that, for any fees that could not "be correlated to certificates of inspection, the audit firm shall draw up a report detailing the costs and fees following normal market practice”.⁴⁴¹ In view of the lack of a payment mechanism for special services prior to the issuance of Resolution 1106/98, the Claimant asserts that Article 2 "intended to cover invoices submitted after its entry into force, even if certain works were carried out beforehand."⁴⁴²

⁴³⁵ Reply, para. 63; Contract, Clauses 6, 8, 9, 13 (C-2); Second Bianchi Report, paras. 18(v), 172; Hearing Tr., Day 1 (6 April 2021), 50:15-23; Hearing Tr., Day 7 (14 April 2021), 1075:11-19. ↩

⁴³⁶ Hearing Tr., Day 2 (7 April 2021), 253:1-263:10; Hearing Tr., Day 7 (14 April 2021), 1038:16-24, 1039:14-1040:1. ↩

⁴³⁷ Hearing Tr., Day 2 (7 April 2021), 253:1-263:10. ↩

⁴³⁸ Hearing Tr., Day 4 (9 April 2021), 569:13-16. ↩

⁴³⁹ Hearing Tr., Day 2 (7 April 2021), 253:1-254:13. ↩

⁴⁴⁰ Hearing Tr., Day 2 (7 April 2021), 254:17-263:10; Banana Imports into Argentina Special Services Report (C-122); Temporary Imports Special Services Report (C-131); Kiwi Imports Special Services Report and Related Work Product (C-134); Asia Imports Special Services Report and Related Work Product (C-124); Annex to Claimant's Closing Statement, 14 April 2021. ↩

⁴⁴¹ Reply, para. 58; Resolution 1106/98, Article 2 (C-8) (translation by the Claimant); Hearing Tr., Day 1 (6 April 2021), 51:1-13; Hearing Tr., Day 7 (14 April 2021), 1037:6-9. ↩

⁴⁴² Hearing Tr., Day 7 (14 April 2021), 1077:15-1078:6. ↩

[Page 75]

210. The Claimant maintains that, despite the fact that it duly performed the special services and invoiced the Respondent in accordance with Resolution 1106/98, the Respondent has refused to compensate the Claimant for such services.⁴⁴³ The Claimant alleges that the special services were provided at the request of the Committee, some of these requests were made in writing and specifically based on Clause 8 of the Contract.⁴⁴⁴ The Claimant notes that in 2006, many years after the special services had been performed, the Respondent requested extensive supporting materials in respect of each invoice for these services.⁴⁴⁵ According to the Claimant, such documentation was provided to the Committee and has also been submitted in this arbitration.⁴⁴⁶

211. Moreover, the Claimant alleges that the Respondent recognized on a number of occasions that the special services were duly performed and that the Claimant was entitled to receive fees accordingly.⁴⁴⁷ The Claimant points out that upon the termination of the Programme the Respondent expressly acknowledged that, in addition to the Claimant's audit tasks, the Claimant had also "prepared Special Reports on request from the Executive Committee to arbitrate corrective actions.”⁴⁴⁸ The Claimant also underscores that the Respondent previously approved one of the Claimant's special services invoices.⁴⁴⁹ In addition, the Claimant cites a legal opinion provided by DGAJ to MECON in June 2001 that recognized that the Claimant could be asked to perform “tasks that [were] especially required by the Executive Committee” which may not be related to the review of Inspection Certificates, and that this was precisely why the Resolution 1106/98 established a specific basis to calculate the fees for such services.⁴⁵⁰

212. In the light of the above, the Claimant concludes that the Respondent's failure to pay for the special services breached the four obligations arising under Article 2(2) of the Treaty.⁴⁵¹

⁴⁴³ Statement of Claim, paras. 200-201; Reply, para. 59. ↩

⁴⁴⁴ Hearing Tr., Day 7 (14 April 2021), 1037:1-5; Asia Imports Special Services Report and Related Work Product, p. 22 (C-124); Amplified Administrative Claim, 6 December 2004, p. 35 (C-54). ↩

⁴⁴⁵ Statement of Claim, para. 200; Letters from ICS to the Committee, 12 June 2006 to 1 August 2006 (C-59). ↩

⁴⁴⁶ Reply, para. 67; Supporting Files for the Special Services Reports (C-101 – C-121); Hearing Tr., Day 1 (6 April 2021), 62:1-63:19, 64:16-65:3. ↩

⁴⁴⁷ Reply, paras. 63, 65. ↩

⁴⁴⁸ Reply, para. 63; Committee Certification No. IPE 164/04, 22 July 2004 (C-98) (translation by the Claimant). ↩

⁴⁴⁹ Statement of Claim, para. 199; Letter from the Committee to ICS, 22 August 2002 (C-42); Hearing Tr., Day 1 (6 April 2021), 61:19-62:1. ↩

⁴⁵⁰ Reply, para. 65; DGAJ Opinion 1747, June 2001 (C-99) (translation by the Claimant); Hearing Tr., Day 1 (6 April 2021), 51:14-18; Hearing Tr., Day 7 (14 April 2021), 1075:20-1076:11. ↩

⁴⁵¹ Statement of Claim, para. 202. ↩

[Page 76]

213. First, the Claimant claims that the Respondent breached the FET standard by:

a) frustrating the Claimant's legitimate expectations that the Respondent would comply with its obligation to compensate the Claimant for services provided under the Contract;⁴⁵²

b) acting inconsistently, unreasonably and arbitrarily, “with certain branches of the Argentine administration expressly requesting and authorising the Special Services, and others subsequently objecting to the Special Services and refusing to pay for them";⁴⁵³

c) acting in a non-transparent, unreasonable, arbitrary and inconsistent manner, “motivated by improper purposes, in relation to the Claimant's attempts to seek payment for the Special Services";⁴⁵⁴ and

d) unjustly enriching itself by benefitting from the special services performed by the Claimant while refusing to compensate the Claimant for these services.⁴⁵⁵

214. Second, the Claimant submits that the Respondent's failure to pay for the special services constitutes an unreasonable measure which impairs the Claimant's management, maintenance, use, enjoyment and disposal of its investment.⁴⁵⁶

215. Third, the Claimant maintains that the Respondent, through the Committee, MECON, and AFIP, breached its obligation to afford the Claimant's investment FPS by failing to protect the Claimant's legal rights under the Contract.⁴⁵⁷

216. Fourth, the Claimant asserts that the Respondent breached the Umbrella Clause by failing to observe its obligation under the Contract to compensate the Claimant for the special services.⁴⁵⁸

(b) The Respondent's Position

217. The Respondent submits that the alleged special services “were nothing but tasks that ICS was required to carry out as part of the provision of the [ordinary] auditing services set forth in the

⁴⁵² Statement of Claim, para. 202(a)(i); Hearing Tr., Day 1 (6 April 2021), 29:10-18. ↩

⁴⁵³ Statement of Claim, para. 202(a)(ii). ↩

⁴⁵⁴ Statement of Claim, para. 202(a)(iii). ↩

⁴⁵⁵ Statement of Claim, para. 202(a)(iv). ↩

⁴⁵⁶ Statement of Claim, para. 202(b). ↩

⁴⁵⁷ Statement of Claim, para. 202(c). ↩

⁴⁵⁸ Statement of Claim, para. 202(d); Hearing Tr., Day 1 (6 April 2021), 21:4-6. ↩

[Page 77]

Contract".⁴⁵⁹ In addition, the Respondent maintains that (i) paying for “special services” would be contrary to Argentine government procurement regulations;⁴⁶⁰ (ii) the fees payable for the alleged special services would have been accrued in Pesos;⁴⁶¹ and (iii) the fees claimed have not been justified.⁴⁶²

218. First, the Respondent asserts that the purported special services were “covered by the payment of the auditing services' fees”.⁴⁶³ The Respondent argues that under Clauses 8, 9 and 13 of the Contract the Claimant agreed to perform various jobs, including submitting reports pertaining to the oversight of certain operations or to deficiencies noted in the course of providing its services.⁴⁶⁴ The Respondent argues that such services are covered by the fees set forth in Clause 3 and that Clause 21 expressly stated that the Claimant would “not be entitled to receive any benefit, payment, subsidy, compensation or right which is not expressly stipulated or provided for in this contract.”⁴⁶⁵ Relying on the opinion of its expert on Argentine law, the Respondent asserts that the cited clause is a provision with “restrictive criteria”.⁴⁶⁶

219. The Respondent further alleges that each of the purported “special services” consisted in tasks that formed part of the regular auditing services under the Contract, notably the analysis of data from Inspection Certificates; physical inspections; and the verification of prices, customs valuation or the tariff classification of determined sets of goods.⁴⁶⁷ The Respondent argues that the Claimant's own descriptions belie the “special” nature of the services:⁴⁶⁸

a) "Analysis of Deficiencies Detected in the Issue of the CIPI”: the Claimant states that it "selected some Import Pre-Shipment Inspection Certificates and found that they failed

⁴⁵⁹ Rejoinder, paras. 147, 256, 268, 281, 295. ↩

⁴⁶⁰ Statement of Defence, paras. 248-262; Rejoinder, paras. 164-180. ↩

⁴⁶¹ Rejoinder, paras. 181-186. ↩

⁴⁶² Rejoinder, paras. 187-192. ↩

⁴⁶³ Statement of Defence, paras. 182-247; Rejoinder, paras. 150-163, 256, 268; Hearing Tr., Day 1 (6 April 2021), 93:22-96:10. ↩

⁴⁶⁴ Statement of Defence, para. 178; Rejoinder, para. 153; Contract, Clauses 8-9, 13 (C-2); Hearing Tr., Day 7 (14 April 2021), 1119:21-1120:20. ↩

⁴⁶⁵ Statement of Defence, paras. 179-180; Rejoinder, paras. 153, 155; Contract, Clauses 3, 21 (C-2); Hearing Tr., Day 7 (14 April 2021), 1120:20-1121:14. ↩

⁴⁶⁶ Hearing Tr., Day 7 (14 April 2021), 1120:20-1121:10; Hearing Tr., Day 4 (9 April 2021), 570:10-18. ↩

⁴⁶⁷ Statement of Defence, para. 185; Rejoinder, para. 157; Hearing Tr., Day 1 (6 April 2021), 97:5-20. ↩

⁴⁶⁸ Rejoinder, para. 158. ↩

[Page 78]

to comply with MEyOySP Resolution No. 1278 of 7 November 1997, and that others had inspection service deficiencies”;⁴⁶⁹

b) "Special Audit Report – Asia Imports”: the Claimant audited 32 Inspection Certificates in order to verify whether there were serious under-invoicing cases in imports from Asia;⁴⁷⁰

c) Special Report on “Committee Certificates": which comprised four “letters, of one page each," the Claimant provided summaries and statistics of its auditing services;⁴⁷¹

d) “TDK Line Study”: the Claimant covered "a sample of Inspection Certificates of TDK and SAMSUNG products”;⁴⁷²

e) “Chicken Imports Report SADIA S.A.": the Claimant "audited four inspection certificates issued by the inspection company Bureau Veritas” corresponding to imports processed by SADIA ARG S.A.;⁴⁷³

⁴⁶⁹ Statement of Defence, paras. 189-191; Report on Deficiencies Detected in the Issue of Certificates, 8 June 1999, p. 01311, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-85). ↩

⁴⁷⁰ Statement of Defence, paras. 192-194; Report on Asia Imports, 5 August 1998, p. 01540, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-86). ↩

⁴⁷¹ Statement of Defence, paras. 195-200; ICS's letter C/98/13801/ARG, without the signature of the sender from ICS, sent to Rezk, in his capacity as head of the Committee's Programme, 19 June 1998, p. 620, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-87); ICS's letter C/98/13806/ARG, signed by Eirc Rojo from ICS, sent to Rezk, in his capacity as head of the Committee's Programme, 22 June 1998, p. 621, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-88); ICS's letter C/98/14581/ARG, without the name of the sender from ICS, sent to Rezk, in his capacity as head of the Committee's Programme, 8 October 1998, p. 629, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-89); ICS letter C/98/14699/ARG, sent by General Manager Carlos Cheble to Rezk, in his capacity as head of the Committee's Programme, 30 October 1998, p. 630, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional - Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-90). ↩

⁴⁷² Statement of Defence, paras. 204-206; SWIPCO's letter signed and sent by General Manager Cheble to Rezk, in his capacity as head of the Committee's Programme, dated 19 May 1999, p. 01228, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario”, File No. 1948/12 (R-91). ↩

⁴⁷³ Statement of Defence, paras. 207-209; SADIA Chicken Report, 11 February 1999, p. 01263, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-92). ↩

[Page 79]

f) “Glass and Glassware Study”: the Claimant verified the tariff classification related to the importer Soifer Hnos. S.A.I.C. “us[ing] previously audited inspection certificates";⁴⁷⁴

g) “Marble and Granite San Luis S.A.”: which comprised a two-page letter, the Claimant provided "additional information on No. 1-98-013925-0 issued by Supervillance S.A. in regard to importer Mármoles y Granitos de San Luis S.A., with the sole purpose of analyzing the tariff classification”;⁴⁷⁵

h) "Brazil Imports, October - December 1998 and January 1999”: the Claimant "analyzed inspection certificates during a given period and different graphs were drawn up" assessing the impact that the devaluation of the Brazilian currency against the U.S. dollar had on imports to Argentina;⁴⁷⁶

i) “Imports Chapter 30, October - December 1998 and January 1999”: the Claimant "analyz[ed] inspection certificates" related to tariff positions in Chapter 30 of the Mercosur Common Nomenclature (Pharmaceutical Products);⁴⁷⁷

j) “Colonia Uruguay Free Zone Report”: the Claimant's analysis focused "on inspection certificates issued by Intertec, Inspectorate, Socotec and Surveyseed," all of them Inspection Companies in the free trade zone of Colonia (Uruguay);⁴⁷⁸

k) "Report regarding Compliance with CEPIPI Article 2, provision No. 4": the Claimant corroborated the Inspection Companies' compliance with regulations on the

⁴⁷⁴ Statement of Defence, paras. 210-212; SWIPCO's letter C/98/14188/ARG, 18 August 1998, p. 633, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-93). ↩

⁴⁷⁵ Statement of Defence, paras. 213-214; ICS's letter C/98/14688/ARG, signed and sent by Legal Representative Daniel Blondeau and Engineer Carlos Cheble, in his capacity as General Manager, to Rezk, head of the Committee's Programme, 29 October 1998, pp. 01528, 01529, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional - Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-94). ↩

⁴⁷⁶ Statement of Defence, paras. 221-223; Brazil Imports Report, 17 February 1999, p. 01515, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-95). ↩

⁴⁷⁷ Statement of Defence, paras. 224-225; Chapter 30 Imports in File No. EXP-S01:0438572/2005, commenced on 26 December 2005, pp. 6-7 (R-139). ↩

⁴⁷⁸ Statement of Defence, paras. 228-229; SWIPCO's letter C/99/15496/ARG, 20 April 1999, submitted by ICS as Appendix XXVII to its statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional - Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-97). ↩

[Page 80]

identification of goods by reviewing a sample of Inspection Certificates. The Respondent emphasizes that the Claimant acknowledged in this report that it was "responsible for expressing an opinion on the said certificates on the basis of [its] audit job";⁴⁷⁹

l) "Analysis of Imports among Related Companies”: the Claimant “analyse[d] inspection certificates which revealed a link between importer and exporter". In this case, the Respondent stresses that the Claimant also recognized that it was “responsible for expressing an opinion on the said certificates on the basis of [its] audit job";⁴⁸⁰

m) “Iquique 2 Report”: the Claimant stated that it "exhaustively audit the certificates issued by the inspection companies for operations carried out during 2000/2001 from the Iquique (Chile) free zone in order to determine if there were tax losses and the amount thereof";⁴⁸¹ and

n) “Satellite Antenna Report”: the Claimant, in response to a request made by the Committee pursuant to Clause 8 of the Contract, “analyzed the value of five certificates issued by inspection company Surveyseed".⁴⁸²

220. Further, the Respondent asserts that, in five of the alleged special reports, the Claimant refers to the verification of prices of goods that were or could potentially be covered by the Programme,

⁴⁷⁹ Statement of Defence, paras. 230-232; Report regarding Compliance with Article 2, provision 4 of the Executive Committee, p. 01370, submitted by ICS as Appendix XXVII to its statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-101). ↩

⁴⁸⁰ Statement of Defence, paras. 233-235; Analysis of Imports among Related Companies, p. 01727, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-102). ↩

⁴⁸¹ Statement of Defence, para. 238; Executive Committee's letter No. 0485, 2 March 2001, p. 01860, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-104). ↩

⁴⁸² Statement of Defence, paras. 241-243; Executive Committee's letter No. 0060/01, signed by Bizzotto in his capacity as head of the Committee's Programme, 10 January 2001 (R-106); ICS's letter, signed and sent by Legal Representative Juan Alemann to Bizzotto, in his capacity as head of the Committee's Programme, dated 24 January 2001, pp. 02143-02146, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario”, File No. 1948/12 (R-107). ↩

[Page 81]

namely, the: "Banana Imports into Argentina”,⁴⁸³ “Kodak Study”,⁴⁸⁴ "Report on Iquique (Chile), Colonia and Montevideo, Uruguay Free Zone”,⁴⁸⁵ "Kiwi Imports Study",⁴⁸⁶ and "Rito Kosher Milk Report".⁴⁸⁷ The Respondent adds that in some of the invoices for the purported special services the Claimant itself stated that the amount charged corresponded to auditing fees.⁴⁸⁸

221. In the following table, the Respondent specifies which type of tasks were performed in respect of each "special service":

⁴⁸³ Statement of Defence, paras. 187-188; Report on Banana Imports into the Argentine Republic, dated 1 September 1999, pp. 01215-01221, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-84). ↩

⁴⁸⁴ Statement of Defence, paras. 201-203; Kodak Report in File EXP-S01:0001938/2006, commenced on 2 January 2006, pp. 04-07 (R-119). ↩

⁴⁸⁵ Statement of Defence, paras. 218-220; Free Zone Report in File EXP-S01:0001462/2006, commenced on 2 January 2006, p. 2 (R-137). ↩

⁴⁸⁶ Statement of Defence, paras. 226-227; Kiwi Imports Report, p. 02014, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings "Inspection and Control Services c/ Estado Nacional - Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-96). ↩

⁴⁸⁷ Statement of Defence, paras. 244-246; Executive Committee's letter No. 1123/01, 27 June 2001, p. 02306, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-108). ↩

⁴⁸⁸ Rejoinder, paras. 175-176; ICS, Invoices and collection documents (CLEX-16). ↩

[Page 82]

222. Second, the Respondent contends that the second sentence of Article 2 of Resolution 1106/98, invoked by the Claimant, cannot serve as a basis to compensate the alleged “special services.⁴⁸⁹ The Respondent argues that the first eight reports claimed were rendered between June 1998 and August 1998, before Resolution 1106/98 was approved on 9 September 1998.⁴⁹⁰ The Respondent further contends that Resolution 1106/98 did not expand the scope of services covered by the Contract, and that MECON, the entity that issued Resolution 1106/98, lacked the powers to do so.⁴⁹¹ Moreover, the Respondent argues that this provision only applies to tasks that cannot be correlated to Inspection Certificates, such that it could not have covered tasks that formed part of the Claimant's auditing services under the Contract.⁴⁹² In any event, the Respondent contends that a review of the documentation provided by the Claimant and Mr. Santamaría's testimony evidences that the alleged special services did not comply with the requirements under Resolution 1106/98.⁴⁹³

223. Third, the Respondent maintains that any payment for the alleged special services would be contrary to Argentine government procurement regulations.⁴⁹⁴ The Respondent asserts that, pursuant to the Tender Terms and Conditions, the Claimant was subject to the rules governing public procurement in Argentina.⁴⁹⁵ According to the Respondent, such rules require that payments for services provided to the administration be supported by service orders and an acknowledgement that the service was provided.⁴⁹⁶ The Respondent indicates that the Committee thus requested the Claimant to provide in respect of each report (i) the technical and economic justification for its request; (ii) the service orders signed by the parties; and (iii) the reasonableness of the agreed-upon conditions regarding the time of delivery, payment method, receipt and conformity by the Committee.⁴⁹⁷ According to the Respondent, given that the Claimant “never

⁴⁸⁹ Statement of Defence, paras. 175-179; Rejoinder, paras. 150-151, 157. ↩

⁴⁹⁰ Rejoinder, paras. 150-151; Resolution 1106/98 (C-8); Hearing Tr., Day 1 (6 April 2021), 96:15-97:5. ↩

⁴⁹¹ Rejoinder, para. 156; Second Comadira Report, para. 177; Hearing Tr., Day 7 (14 April 2021), 1121:15-1122:11; Hearing Tr., Day 4 (9 April 2021), 561:11-20. ↩

⁴⁹² Rejoinder, para. 157; Hearing Tr., Day 4 (9 April 2021), 562:17-21. ↩

⁴⁹³ Hearing Tr., Day 7 (14 April 2021), 1127:12-1133:14; Hearing Tr., Day 2 (7 April 2021), 236:6-15. See also Statement of Defence, paras. 176-179. ↩

⁴⁹⁴ Statement of Defence, paras. 248-262; Rejoinder, paras. 164-180. ↩

⁴⁹⁵ Rejoinder, para. 173. ↩

⁴⁹⁶ Rejoinder, paras. 170-172; Second Dapena Report, paras. 31-32; Presidential Decree No. 5720/1972, 28 August 1971, Government Procurement Rules, Chapter VI, Article 61(53)(a) (R-43). ↩

⁴⁹⁷ Statement of Defence, paras. 250-251; Rejoinder, paras. 167, 256; Letter from the Committee No. 958/2001 to ICS, 4 June 2001, enclosing Letter from SIGEN to the Committee, 30 May 2001 (C-44). ↩

[Page 83]

responded satisfactorily" to this request for supporting documentation, the invoices were never approved by the Committee.⁴⁹⁸

224. Fourth, the Respondent submits that the Claimant failed to provide sufficient support for the expenses it allegedly incurred in connection with the special services.⁴⁹⁹ The Respondent contends that the direct and indirect costs reported by the Claimant “were related to Claimant's ordinary course of business”.⁵⁰⁰ Therefore, the Respondent concludes such costs have already been paid for by Argentina under the Contract.⁵⁰¹

225. Fifth, and in the alternative, the Respondent objects to the Claimant's attempt to seek payment for the special services in U.S. dollars.⁵⁰² The Respondent notes that half of the invoices for the special services were issued in Pesos and that almost all of the costs allegedly incurred by the Claimant were incurred in Pesos.⁵⁰³

C. THE TRIBUNAL'S ANALYSIS

1. The Claimant's Claims

226. The Claimant asserts violations of Argentina's obligations set forth in Article 2(2) of the Treaty, which reads:

Investments of investors of each Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy protection and constant security in the territory of the other Contracting Party. Neither Contracting Party shall in any way impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory of investors of the other Contracting Party. Each Contracting Party shall observe any obligation it may have entered into with regard to investments of investors of the other Contracting Party.

227. The Claimant identifies four distinct obligations contained in this provision, namely FET (fair and equitable treatment), FPS (full protection and security), the prohibition of unreasonable and discriminatory conduct, and the Umbrella Clause. The Claimant has focused on FET and the Umbrella Clause, but does not appear to have restricted its case, which is thus that each one of

⁴⁹⁸ Rejoinder, paras. 169-171, 256; Hearing Tr., Day 1 (6 April 2021), 97:21-99:16; Hearing Tr., Day 7 (14 April 2021), 1124:10-1126:24. ↩

⁴⁹⁹ Statement of Defence, para. 264; Rejoinder, paras. 187-192. ↩

⁵⁰⁰ Rejoinder, paras. 190-191; Second Dapena Report, Section II.A.4.d, Annex 2. ↩

⁵⁰¹ Rejoinder, paras. 190-191. ↩

⁵⁰² Rejoinder, paras. 181-186. ↩

⁵⁰³ Rejoinder, para. 185; Second Dapena Report, paras. 84-85. ↩

[Page 84]

the four standards in Article 2(2) was breached by each one of the following four acts of the Respondent:

- non-payment of the Claimant's fees exceeding 10% of the inspection companies' fees according to the fee cap in Article 3 of the Contract;

- "pesification” of the Claimant's remuneration, by paying in pesos after Argentina abandoned parity between the Argentine peso and U.S. dollar;

- imposing, in 2003, a reduction of the Claimant's remuneration by 13% as from July to December 2001; and

- non-payment of the Claimant's remuneration for the "Special Services".

228. The Respondent's primary position is that its actions were consistent with the Contract, duly interpreted under the applicable Argentine law:

- the 10% Fee Cap was applied as agreed in Article 3 of the Contract;

- the Contract already provided for fees in Pesos;

- the 13% reduction in the Claimant's remuneration was accepted by performance when the Claimant continued to provide services after the expiration of the Contract; and

- the Special Services are covered by the remuneration paid to Claimant for its auditing services.

229. In addition, to the extent that the Respondent's acts violate the Contract, these acts are said to be consistent with the Treaty. In the Respondent's view, the requirements of Article 2(2) of the Treaty apply only to sovereign measures, and the measures it enacted complied with these requirements.

230. The latter argument is brought in particular against the Claimant's Umbrella Clause claims, and in support of the assertion that acts breaching the Contract cannot, by themselves, also constitute breaches of the Umbrella Clause. The proper interpretation of the Umbrella Clause is therefore the starting point for the Tribunal's analysis.

[Page 85]

2. The Umbrella Clause

231. The Tribunal recalls its Award on Jurisdiction, in which it rejected the Respondent's preliminary objection relating to the scope of the Umbrella Clause to the effect that the provision only covered certain kinds of agreements entered into by the State:

One must begin with the plain meaning – the “ordinary meaning" – of the Umbrella Clause: "[e]ach Contracting Party shall observe any obligation it may have entered into with regard to investments of investors of the other Contracting Party." Considering the use of the mandatory term “shall", the sentence is imperative. The expression "any obligation" is capacious, i.e. it is not limited to certain types of obligations but rather encompasses all obligations a host State may have entered into with regard to investments of investors of the other Contracting Party. In particular, this expression is capable of applying to obligations arising under national law, e.g. those arising from a contract. Indeed, as noted in SGS v. Philippines, "it would normally be under its own law that a host State would assume obligations 'with regard to specific investments in its territory by investors of the other Contracting Party”. Interpreting the wording of the Umbrella Clause, it is clear that each Contracting Party shall observe any obligation it has assumed, or will in the future assume, with regard to investments covered by the Treaty.

The object and purpose of the Treaty also support such an interpretation. The aim of the Treaty is to promote and reciprocally protect investments. According to its preamble, the Contracting Party expressed the desire to “create favourable conditions for greater investment by investors of one State in the territory of the other State". When it comes to its interpretation, account must be taken of the purpose of the Treaty, which is to favour the protection of covered investments. In this way, the principle of effectiveness will be applied. The Tribunal agrees with the assessment made in SGS v. Philippines and considers it entirely consistent with the object and purpose of the Treaty to hold that the commitments made by the State towards investments are incorporated and brought within the framework of the Treaty by Article 2(2).

The scope of the Treaty is limited to investments as defined by the Treaty. The Tribunal refers to its previous developments in which it found that the Claimant held a protected investment (see above, para. 297). The wording of Article 2(2) of the Treaty does not support, even implicitly, imposing an additional requirement to limit the effect of the Umbrella Clause to a particular definition of investment agreements. The requirement of the international element allegedly applicable to agreements concluded in relation to investments is not provided for in the Treaty. The Tribunal does not see on what basis such a requirement would be established. (citations omitted)⁵⁰⁴

232. For the same reasons, the Tribunal cannot accept the Respondent's argument at this stage of the proceedings that the Umbrella Clause covers only certain specific kinds of breaches of the agreements covered by that clause. To accept this argument would require the Tribunal to find that the Umbrella Clause covers only certain kinds of obligations within covered agreements, or that it only prohibits certain kinds of acts by the State in relation to those agreements. As already held by the Tribunal, the coverage of the Umbrella Clause extends to “any obligation” and “is not limited to certain types of obligations but rather encompasses all obligations a host State may have entered into with regard to investments of investors of the other Contracting Party.” The

⁵⁰⁴ Award on Jurisdiction, paras. 343-345. ↩

[Page 86]

phrase "shall observe" in the Umbrella Clause “is imperative" and unqualified. The Tribunal thus concludes in similar fashion here that the limitation asserted by the Respondent "is not provided for in the Treaty. The Tribunal does not see on what basis such a requirement would be established."

233. In this sense, the Tribunal adopts the conclusion of the tribunal in SGS v. Paraguay, as equally applied to the Umbrella Clause in Article 2(2) of the present Treaty:

Given the unqualified text of [the Umbrella Clause], and its ordinary meaning, we see no basis to import into [the Umbrella Clause] the non-textual limitations that Respondent proposed in its Reply. [The Umbrella Clause] does not exclude commercial contracts of the State from its scope. Likewise, [the Umbrella Clause] does not state that its constant guarantee of observance of such commitments may be breached only through actions that a commercial counterparty cannot take, through abuses of state power, or through exertions of undue government influence. Respondent's appeal to the putative “true meaning” of umbrella clauses cannot take precedence over the plain language of the umbrella clause that is before us. In effect, we see no basis on the face of the clause to believe that it should mean anything other than what it says that the State is obliged to guarantee the observance of its commitments with respect to the investments of the other State party's investors. (citations omitted)⁵⁰⁵

234. Notwithstanding the foregoing, the Umbrella Clause is not a conflict rule in the sense of stipulating that the Contract is governed by public international law. The Contract remains between the State and the investor, who have agreed a choice of Argentine law to govern it. The Tribunal thus agrees with the holding, cited by the Respondent, from the annulment decision in CMS v. Argentina, to the effect that “[t]he effect of the umbrella clause is not to transform the obligation which is relied on into something else; the content of the obligation is unaffected, as is its proper law."⁵⁰⁶

235. Nor is the Umbrella Clause a stabilization clause, which would freeze norms of Argentine law and act akin to a negative choice of the law of the State for all norms that would affect performance of the Contract after it is made. Rather, the Umbrella Clause is worded as a substantive undertaking by reference to other substantive undertakings (“any obligation it may have entered into"), and is better analogized to an undertaking in the nature of a suretyship, guarantee, or joint obligation made by Argentina in its capacity as a party to the Treaty for the obligations Argentina would later assume in the Contract in its capacity as a party to the Contract.

⁵⁰⁵ SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29, Decision on Jurisdiction, 12 February 2010, para. 168 (CLA-3). ↩

⁵⁰⁶ CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision on Annulment, 25 September 2007, para. 95(c) (RLA-62). ↩

[Page 87]

This undertaking does not prevent mandatory norms issued by Argentina in its capacity as lawmaker from applying to the Contract.

236. The above interpretation of the Umbrella Clause, and the framework of undertakings contained in Article 2(2) of the Treaty, helps shape the issues and the sequence in which they must be decided in the present case. For two of the Claimant's claims—the 10% Fee Cap and the Special Services-the Respondent's defences are limited to the Contract's terms; they do not engage subsequent measures. For the other two claims the pesification and the 13% reduction—the Respondent's defences also involve subsequent justificatory measures that may need to be assessed under the FET, FPS, and non-discrimination standards.⁵⁰⁷ In all four instances, if all the non-payments, reduced payments, and delayed payments were contractually justified, there is no breach of the Contract and no breach of the Umbrella Clause. The contractual obligations that are guaranteed have been performed, such that no liability arises under the Umbrella Clause.

237. For the Claimant's part, it is in theory possible to argue that the FET, FPS, and non-discrimination standards could be breached by conduct that is strictly in keeping with the Claimant's rights and obligations under the Contract. Such a claim has not, however, been advanced by the Claimant, whose case is premised on the Respondent's alleged breaches of the Contract. Hence, it is necessary to determine first the rights under the Contract.

238. Accordingly, the Tribunal first needs to decide whether the Respondent's actions are consistent with the Contract, as interpreted and applied in accordance with its applicable law. At the same time, the Tribunal recalls its holding in its Award on Jurisdiction that "given the different legal bases of the contractual claims before the Argentinian courts and the claims in the present arbitral proceedings, the Tribunal is not called upon to decide the Claimant's claims arising from contract as such."⁵⁰⁸ The Tribunal held that, while the Tribunal does not have jurisdiction to decide with res judicata effect the issues arising under the Contract and Argentinian law (in view of Clause 23 of the Contract), it may have to decide them as incidental issues in order to decide the issues arising under the Treaty, which it is empowered to decide with res judicata effect.⁵⁰⁹

239. In the light of the foregoing, the Tribunal must adopt the following sequence to decide the substantive issues. The Tribunal must first decide whether any of Argentina's non-payments, reduced payments, or delayed payments for the Claimant's services breached any of Argentina's

⁵⁰⁷ See infra sections VII.C.5 and VIII.C. ↩

⁵⁰⁸ Award on Jurisdiction, para. 367. ↩

⁵⁰⁹ Award on Jurisdiction, para. 340. ↩

[Page 88]

obligations under the Contract as interpreted and applied in accordance with Argentine law. If that question is answered in the affirmative, then the Tribunal must analyse two follow-on questions:

(a) whether any alleged breach of contract was justified by mandatory norms issued by Argentina and applicable to the Contract under Argentine law; and

(b) whether any such justifications were inconsistent with Argentina's undertakings under the FET, FPS, and non-discrimination standards in Article 2(2) of the Treaty.

240. The Tribunal must thus take each of the Claimant's contractual claims and determine in each case whether the Claimant correctly invokes a breach of the Contract by the Respondent. This is to what the Tribunal now turns.

3. The 10% Fee Cap

241. Clause 3 of the Contract provided as follows:

“THE AUDITOR” undertakes to perform this contract fully in accordance with its quotation included in its Bid in Envelope No. 2 and the clarification concerning the latter, that is, for the sum consisting of ZERO POINT SIXTY FOUR PERCENT (0.64%) of the FOB, FOR or FOT value declared on each inspection certification of audited merchandise. In no case shall the fee to be received by the AUDITOR surpass, during the respective quarter, TEN PERCENT (10%) of the amount invoiced by the inspection companies nor may it be under FOUR PERCENT (4%) thereof, for which purpose, the selection systems to be implemented to identify the shipments to be audited, must take these facts into account.⁵¹⁰

242. This clause of the Contract provided that the Claimant's fees for each quarter could not exceed the 10% Fee Cap, i.e., 10% of the amount invoiced by the Inspection Companies. Nominally, this would preclude the Claimant from earning or invoicing fees beyond this cap, which is stated in strict terms: "[i]n no case shall the fee to be received by the Auditor surpass, during the respective quarter, TEN PERCENT (10%)”.

243. At the same time, the very sentence setting out the cap links it to the implementation by the Respondent of an adequate system to select the Inspection Certificates to be audited by the Claimant, as also foreseen in Clauses 6, 8, and 13 of the Contract.⁵¹¹ In particular, Clause 6 of the Contract reads as follows:

⁵¹⁰ Contract, Clause 3 (C-2). ↩

⁵¹¹ Contract, Clauses 3, 8, 13 (C-2). ↩

[Page 89]

The AUDITOR shall carry out the inspections at the pertinent Customs, taking care to maintain a suitable ratio according to the operations implemented at each, and in all cases must resolve upon the means required to undertake random controls, as well as to comply with the instruction imparted to it by the EXECUTIVE COMMITTEE of the PRE-SHIPMENT INSPECTION OF IMPORTS PROGRAMME, always ensuring that the values in question do not represent a base that may exceed the maximum fee referred to in clause three.

244. In essence, these provisions foresee a system by which the shipments selected to be audited will not yield a fee surpassing ten percent of the total fees that will be invoiced by all the Inspection Companies for the same period. For this purpose, it is necessary to know, at the time of selecting the shipments to be audited by the Claimant, the value of all the shipments, including those not selected to be audited. Only the Respondent had access to this information at the time when Inspection Certificates were being audited by the Claimant. The latter did not have access to the amount of fees that would be invoiced by the Inspection Companies for all the Inspection Certificates, including those that were not audited.

245. The selection system foreseen to serve this purpose was to be the “red channel” system.⁵¹² However, the “red channel” system failed to work in practice, and the Respondent's officials ultimately instructed the Claimant to “install itself physically at the points of destination and to try to take as many dispatches as it can, [even if] this is not the ideal solution."⁵¹³ As a result, the Inspection Certificates that the Respondent required the Claimant to audit carried auditing fees that repeatedly exceeded the 10% Fee Cap. Furthermore, the Inspection Companies invoiced their fees quarterly, whereas the Claimant had to invoice its fees monthly under the Contract.⁵¹⁴

246. The Claimant asserts that the failure to implement an adequate selection system meant that it was not in a position to determine how much the Inspection Companies' total invoicing would be for each quarter, and thus could not comply with the 10% Fee Cap. The Claimant nevertheless contends that it was entitled to a remuneration commensurate with the auditing services it provided, and that it was incumbent on the Respondent, if it wanted to avail itself of the 10% Fee Cap, to devise the method necessary to ensure that it would not require the Claimant to audit certificates that would carry fees exceeding the cap. The Claimant characterizes the devising of such a selection system as a quid pro quo for the imposition of the cap (triggering an exceptio non adimpleti contractus if it was not implemented) and, alternatively, as a condition precedent to the

⁵¹² See supra paras. 57-58. ↩

⁵¹³ Letter from the Committee to AFIP, 6 August 1999 (C-32) (translation by the Claimant); Report conducted at terminals 1 and 2, 4 February 1999 (C-28); Hearing Tr., Day 2 (7 April 2021), 273:1-11. ↩

⁵¹⁴ Contract, Clause 19 (C-2). ↩

[Page 90]

operation of the cap.⁵¹⁵ Accordingly, the Claimant argues that the Respondent's own failure to comply with Clause 3 rendered the 10% Fee Cap inapplicable.

247. In the circumstances, the Respondent relied on the 10% Fee Cap to reject all monthly invoices and required the Claimant instead to invoice quarterly, and when the Respondent received these quarterly invoices, it refused to pay any amount exceeding 10% of the fees invoiced by the Inspection Companies over the same quarter. The Respondent asserts that the Contract does not condition the application of the 10% Fee Cap on the implementation of an adequate selection system and that the Claimant also failed to make a sufficient effort to bring its fees within the 10% Fee Cap.

248. The issue is therefore whether the Respondent was entitled to insist on the 10% Fee Cap, or whether it had an obligation to pay for the Claimant's auditing services it required without being entitled to rely on the cap. In the latter case, non-payment of the auditing fees exceeding the 10% Fee Cap would be a breach of the Contract. This issue must be resolved as a matter of contract interpretation under Argentine law.

249. The Claimant's arguments assume that its auditing fees had to be consistent and co-extensive with its work, i.e., that the 10% Fee Cap meant that it would not have to audit certificates in an amount such that its fee would exceed 10% of all the Inspection Companies' fees. In other words, the agreed method to respect the cap was to tailor the value of the shipments to be audited so as to respect the cap.

250. It is correct that the 10% Fee Cap was not the kind of cap where the service provider has full control over its work, assesses the amount of work, and agrees to a cap based on its evaluation of the work envisaged. Instead, the auditing work was in practice performed on demand, its scope was set by the Inspection Certificates that the Respondent required the Claimant to audit. The Claimant had limited control over the amount of services provided, i.e., the certificates it was required to audit. It was obliged to follow whatever instructions were provided by the Respondent. Moreover, it was impossible for the Claimant to determine whether the certificates it was required to audit would reach or surpass the cap. The Respondent, however, was in a position to do so. To calculate the 10% Fee Cap, the Claimant would have had to have access, in real time, to the value of all the certificates that the Respondent did not ask the Claimant to audit.

⁵¹⁵ First Bianchi Report, paras. 36-45; Second Bianchi Report, paras. 22-43. ↩

[Page 91]

251. In sum, the 10% Fee Cap was not equivalent to an agreed lump sum remuneration regardless of the services provided. The services required of the Claimant by the Respondent had to be tailored to the cap. Even to the extent that the Contract is taken as an administrative law contract whose scope of work may be unilaterally changed by the State, the agreed link between the fee and the value of audited certificates had to be respected as essential to the economic equilibrium of the Contract. The price of the work was established at 0.64% (and later 0.76%) of the value of the Inspection Certificates. It was not agreed that there could be a disconnect between the quantity of services provided and the amount of remuneration.

252. The scope of work was thus defined by reference to the 10% ratio of the Claimant's fees to the fees of all the Inspection Companies in the Programme. Each Party says that it was incumbent on the other to work out a system to determine the certificates to be audited such that the Claimant's monthly fee would not exceed the 10% Fee Cap. The Claimant says it was impossible for it to do so—both in theory, considering that it had no way of knowing the Inspection Companies' fees, which covered many more certificates than those audited by the Claimant, and also in practice, given the Respondent's instruction “to try to take as many dispatches as it can" rather than implementing any particular selection criteria.

253. The Respondent does not explain how it would have been possible for the Claimant to determine the total fees invoiced by the Inspection Companies, on a monthly basis, let alone in real time. The Respondent simply asserts that the Claimant could have made certain statistical projections and estimates with a view to staying within the 10% Fee Cap. The Respondent does not explain, however, how this would have been expected to work in practice, how such an expectation aligned with the Contract and its performance, or how this would have been consistent with the instruction actually given (i.e., “to try to take as many dispatches as it can").

254. The Respondent insists that the Contract in any event does not establish the implementation of an adequate selection system as a condition precedent to the application of the 10% Fee Cap. It is correct that it does not do so expressly. However, an express textual link is nevertheless made between the “purposes” of the two, the selection system being obliged to "take [the cap] into account" in its design. Moreover, it bears noting that Clause 3 of the Contract establishes not only a 10% Fee Cap, but also a 4% floor. Express language of conditionality would not easily fit.

255. Given the foregoing analysis of the text of the Contract and the circumstances of its performance, the Tribunal thus finds that the Claimant could reasonably claim exemption from the 10% Fee Cap. The Respondent established a selection system in theory, but it was not workable or at least never properly implemented. That circumstance was outside the Claimant's control and

[Page 92]

exclusively within the purview of the Respondent's obligations under the Contract. The 10% Fee Cap could not thus be unreasonably imposed on the Claimant in the absolute terms envisaged by the Respondent's construction of the Contract.

256. In particular, the Tribunal takes into account that the Respondent's actions went beyond a mere breach of the obligation to institute a proper selection system: the Respondent's instruction to the Claimant to abandon the “red channel" system and “install itself physically at the points of destination and to try to take as many dispatches as it can” constituted a wholesale repudiation of this obligation. Such conduct rendered it reasonably impossible for the Claimant to keep its fees under the 10% Fee Cap. It thus precluded the Respondent's right to invoke the correlative (synallagmatic) obligation to reduce the fees to the 10% Fee Cap as a matter of good faith contractual interpretation and exceptio non adimpleti contractus,⁵¹⁶ even under the more restrictive application of that doctrine advocated by the Respondent's expert.⁵¹⁷

257. Finally, the Respondent's invocation of the so-called Petracca doctrine—purporting to require the Claimant to institute administrative claims, or at least expressly reserve its rights, within 90 days of every single assertion of the 10% Fee Cap—is also unavailing in the circumstances. To the extent that this doctrine is not substantively equivalent in operation to the objections based on acquiescence, estoppel, good faith, and prescription already dismissed above,⁵¹⁸ the Tribunal accepts the evidence of the Claimant's expert, Dr. Bianchi, that it would not apply to questions of invoicing or ongoing contractual performance with the formalism that is suggested by the Respondent and its expert, Dr. Comadira.⁵¹⁹

258. The Tribunal therefore concludes that the Claimant was contractually entitled in accordance with Argentine law to the amounts claimed in excess of the 10% Fee Cap.

4. Conversion of U.S. dollar invoices into Pesos

259. Under the Contract, the remuneration was set as a percentage of the value of the shipments recorded in the Inspection Certificates audited by the Claimant. Originally, this percentage was

⁵¹⁶ Argentine Civil Code, in force until 31 July 2015, Article 1201 (ABB-19); Argentine Civil and Commercial Code, 1 August 2015, Article 1032 (ABB-20). ↩

⁵¹⁷ First Comadira Report, para. 100. ↩

⁵¹⁸ See supra para. 128. ↩

⁵¹⁹ Second Bianchi Report, paras. 56-61; Administrative Procedure Act, Section 7 (ABB-56). ↩

[Page 93]

0.64% of the FOB, FOR, or FOT value of each audited Inspection Certificate, as set forth in Clause 3 of the Contract, reproduced once again below:

“THE AUDITOR" undertakes to perform this contract fully in accordance with its quotation included in its Bid in Envelope No. 2 and the clarification concerning the latter, that is, for the sum consisting of ZERO POINT SIXTY FOUR PERCENT (0.64%) of the FOB, FOR or FOT value declared on each inspection certification of audited merchandise. In no case shall the fee to be received by the AUDITOR surpass, during the respective quarter, TEN PERCENT (10%) of the amount invoiced by the inspection companies nor may it be under FOUR PERCENT (4%) thereof, for which purpose, the selection systems to be implemented to identify the shipments to be audited, must take these facts into account.⁵²⁰

260. This fee of 0.64% of the FOB, FOR or FOT value declared on the Inspection Certificates followed from Decree 477/97 and the Tender Terms and Conditions, which stipulated that the Auditor's fee would be 80% of the Inspection Companies' fees:

The price quoted by the bidder shall be a fixed percentage not exceeding EIGHTY PERCENT (80%) of the value of the inspection services established in section g) paragraph II) subparagraph 1) above.⁵²¹

261. In turn, the Inspection Companies' fees were set at 0.8% of the FOB, FOR or FOT value declared on the Inspection Certificates, as set forth in Annex I, Section (g)(II)(1) of Decree 477/97 and the Tender Terms and Conditions:

ZERO POINT EIGHT PER CENT (0.8%) of the FOB, FOR or FOT value declared on each inspection certificate of merchandise of the IMPORT PRE-SHIPMENT INSPECTION PROGRAMME.

The minimum fee to be charged for each transaction shall be TWO HUNDRED FIFTY UNITED STATES DOLLARS (U$S 250).

Fee amounts shall be paid on a monthly basis by [AFIP] pursuant to the procedure and requirements to be established by the Authority of Application.⁵²²

262. Subsequently, Resolution 1106/98 increased the Claimant's remuneration to 0.76% of the FOB, FOR, or FOT value declared on each audited Inspection Certificate. Resolution 1106/98 maintained the Claimant's fees at “EIGHTY PERCENT (80%) of the fees received by the Inspection companies for each audited Inspection certificate", but increased the Inspection Companies' fees to 0.95% of the FOB, FOR, or FOT value declared on each Inspection Certificate as follows:

In consideration for their services, inspection companies shall receive ZERO POINT NINE FIVE PER CENT (0.95%) of the FOB, FOR or FOT value declared on each inspection

⁵²⁰ Contract, Clause 3 (C-2). ↩

⁵²¹ Decree 477/97, Annex III, Section (c)(XI) (C-6) (translation by the Tribunal). ↩

⁵²² Decree 477/97, Annex I, Section (g)(II)(1) (C-6) (translation by the Tribunal on the basis of the Respondent's Closing, Slide 5). ↩

[Page 94]

certificate of goods covered by the PRE-SHIPMENT INSPECTION OF IMPORTS PROGRAMME.

The minimum fee to be charged for each transaction shall be ONE HUNDRED TWENTY UNITED STATES DOLLARS (U$S 120).

The resulting amounts shall be paid on a monthly basis by the [AFIP] pursuant to the procedure and requirements to be established by the Authority of Application.⁵²³

263. The Claimant's fees were to be paid by AFIP as follows:

Payments shall be made monthly in pesos, by the General Administration Bureau of the [AFIP], within THIRTY (30) days following the date the respective invoices are presented, duly approved in accordance with Point c), paragraph VII) of the Specification Sheet. The AUDITOR shall present the invoices pertaining to the duties performed throughout one calendar month, jointly with a summary of the audit reports that have been drawn up, within TEN (10) days of the following month in the form and conditions established by the EXECUTIVE COMMITTEE. Failure to pay at the due time and in the due form shall cause the STATE to be in default, without the need for any demand whatsoever.⁵²⁴

264. In sum, the Claimant's remuneration was set as a proportion of the U.S. dollar value of the shipments, but payments were to be made in Pesos. Until the financial crisis of the end of 2001, the exchange rate between Argentinian pesos and U.S. dollars was pegged at 1:1. Therefore, the fact that the currency of account and the currency of payment were different made no difference. When the fixed parity between the two currencies was repealed at the end of 2001, the interaction between the currency of account and the currency of payment became material. The delay between invoicing and payment also became material to the extent that the exchange rate between the two currencies changed in the interval.

265. The Respondent disputes that remuneration was fixed by reference to the value declared on Inspection Certificates. It does so on the basis that (i) the Inspection Companies' invoicing was in Pesos, (ii) the 10% Fee Cap is expressed by reference to amounts invoiced by the Inspection Companies; (iii) Resolution 1106/98 effectively modified the Claimant's remuneration from “EIGHTY PERCENT (80%) of the value of the inspection services” to “EIGHTY PERCENT (80%) of the fees received by the Inspection companies" (emphasis added). Accordingly, in the Respondent's view, remuneration was to be calculated by reference to amounts invoiced by the Inspection Companies in Pesos, rather than by reference to amounts reported on Inspection Certificates in U.S. dollars.

266. The Tribunal finds that the terms of the Contract and its underlying documentation are clear, and that the accessory elements referred to by the Respondent do not alter their meaning. In particular,

⁵²³ Resolution 1106/98, Articles 1(j), 2 (C-8) (translation by the Tribunal on the basis of the Respondent's Closing, Slide 6). ↩

⁵²⁴ Contract, Clause 19 (C-2). ↩

[Page 95]

the Contract and underlying documents consistently define the Claimant's remuneration directly or indirectly by reference to Inspection Certificate values. The mention of “amount invoiced by the [I]nspection [C]ompanies" in the 10% Fee Cap is thus insufficient to suggest an intention to interpose the legal act of invoicing by the Inspection Companies as the ultimate determinant of the Claimant's remuneration. This is especially so when neither of the Parties would have expected that act to have any impact in the light of peso-dollar parity. The same is true for the suggestion that Resolution 1106/98 intended to modify, without any evident reason, the prior terms of the Contract. The Tribunal thus concludes that, under the Contract, the Claimant's remuneration is to be calculated in dollars.

267. As for the variations in the exchange rate between the time of the invoice and the time of payment at the due date, the question arises whether the conversion of the amount due into Pesos at the time of invoicing has fixed Argentina's debt and ICS's entitlement to the amount in Pesos as invoiced. The answer may again depend on the nature and effect of the legal act of invoicing.

268. Pursuant to the last sentence of Clause 19 of the Contract, "[f]ailure to pay at the due time and in the due form shall cause the STATE to be in default, without the need for any demand whatsoever." As a result of being in automatic default, the Respondent would be liable for any damage caused by the delay in payment beyond the due date, including any currency exchange loss.

269. The foregoing does not end the analysis. In 2002, Argentina enacted the Emergency Law and Decree 214/02, which could justify the pesification of the Claimant's remuneration under Argentine law, notwithstanding the Contract's terms.

270. It is common ground between the Parties that Decree 214/02 applied only to "monetary obligations" and not "value obligations", and that the distinction between the two is to be made according to the definition of money obligations in Article 765 of the Argentine Civil and Commercial Code:

An obligation is a money debt where the debtor owes a certain sum of money, determined or determinable, at the time when the obligation is incurred.⁵²⁵

The Parties differ, however, as to whether the Claimant's remuneration under the Contract was at least determinable as a certain sum of money at the time when the obligation is incurred.

⁵²⁵ Argentine Civil and Commercial Code, 1 August 2015, Article 765 (ABB-26). ↩

[Page 96]

271. The Tribunal finds that it was not, and thus did not constitute a money obligation under Article 765 of the Argentine Civil and Commercial Code. As already set forth above, the Claimant's remuneration was measured by reference to the value of the Inspection Certificates audited, and yet payment was to be made in Pesos. Given that the value obligation expressed in US dollars is to be satisfied by payment in Pesos, it cannot be determined in the payment currency until the date of the invoice. This is precisely because, following the repeal of peso-dollar parity by the Emergency Law, the exchange rate between these two amounts may vary in time. The Claimant's remuneration under the Contract was therefore not determinable at the time the obligation was incurred, i.e., at the time of the auditing of Inspection Certificates.⁵²⁶ Accordingly, the fees under the Contract were a value obligation beyond the scope of application of Decree 214/02.

272. The Tribunal concludes that the Claimant was entitled under the Contract to invoice for the full U.S. dollar value of its services.

5. Application of Decree 1060/01

273. Pursuant to Decree 1060/01, public bodies and entities were ordered to request from suppliers a 13% reduction in the amounts payable for goods or services procured, and to take certain actions if suppliers did not consent to such a reduction in remuneration:⁵²⁷

1) [The responsible officers] will require the suppliers of goods and services the [13%] reduction provided for in article 4 of this decree, in the consideration payable by the National Public Sector.

2) If the supplier does not consent to that reduction, within the period of TEN (10) days of notice of the requirement indicated in paragraph 1), the following procedure must be followed:

a) If the provision of goods or the execution of services is expendable for the general interest, the contract will be revoked.

b) If the provision of goods or the execution of the services is essential, the service, the frequency of deliveries or the requested quantities of goods will be reduced accordingly to adapt the expense to the existing credit, taking into account the decrease ordered. In these cases, the payment of lost profits, of unproductive, indirect expenses, and any concept similar to them, will not be recognized; the contractor's consent will be required for this purpose.

Prior to the negotiation provided for in subsection 2), paragraph b) of this section, the responsible officers for the entities and jurisdictions will require the opinion of the respective Internal Audit Unit.

⁵²⁶ The Tribunal further notes that the 10% Fee Cap, were it to apply, would also preclude the determination of the amount of the Claimant's remuneration at the time of auditing Inspection Certificates, and until the total quarterly amount of fees invoiced by the Inspection Companies was known. This, in the Tribunal's view, further confirms the nature of the obligation as a value obligation. ↩

⁵²⁷ Decree 1060/2001, Articles 1, 4 (C-50). ↩

[Page 97]

Regarding utilities, the conditions in force will be maintained until they are adjusted according to the complementary regulations issued by the SECRETARY FOR THE MODERNIZATION OF THE STATE from the OFFICE OF THE CHIEF OF THE CABINET OF MINISTRIES.⁵²⁸

274. Thus, where the supplier did not consent to the 13% reduction, the respective administrative body was instructed either (i) to terminate the contract, provided that it did not concern an essential public service, or (ii) to reduce the level of services being provided in order to achieve the 13% fee reduction.

275. It is common ground that, until after the termination of the Programme, no such request was made to the Claimant, no consent was given by the Claimant, and no termination or reduction in services ensued. As such, Decree 1060/01 does not apply as such on its own terms.

276. Rather, the Respondent argues that the Claimant should be taken as having tacitly consented to the reduction foreseen in Decree 1060/01 for the period from July to December 2001 in which it continued to provide services after the expiry of the Contract:

The last point that I would like to refer is about Decree 1060, and here the main discussion is about consent. It was very clear from Comadira's explanation that Decree 1060 did not require consent from ICS because consent was only required when a contract was in force. [...T]he Contract expired in March 2001. So, as of July 2001, there was no contract in force. And this is extremely important because today we've heard counsel for Claimant saying that Decree 1060 applied to the Contract. That's not Argentina's position. Argentina's position is that Decree 1060 applies to services provided from July until December which are not based on a contract.⁵²⁹

277. The Respondent also cites Circular No. 05/2001 of the National Procurement Office, issued as a clarification and complement to Decree 1060/01:

3) Contracts that are entered into from the entry into force of the Decree:

From the entry into force of the regulation and since each agency already has its budget reduced by 13%, contracts for the provision of goods and services will [be] entered into taking into account the budget available.⁵³⁰

278. According to the Respondent, by deciding to continue providing services without a contract in force, the Claimant can be taken as having assented to the applicable laws and regulations as they stood at that moment.

⁵²⁸ Decree 1060/2001, Article 1 (C-50). ↩

⁵²⁹ Hearing Tr., Day 7 (14 April 2021), 1115:22-1116:15. ↩

⁵³⁰ Circular No. 05/2001, 29 September 2001 (R-39) (translation by the Tribunal). ↩

[Page 98]

279. The Tribunal has difficulty squaring this argument with the terms of Decree 1060 and Circular No. 05/2001. Neither prejudges the means by which the 13% reduction is to be achieved, as between an agreed reduction, contract termination, or a negotiated reduction in the services provided. And neither even purports to amend Decree 477/97, which provided a legal basis for the Claimant's remuneration for services provided even after the expiry of the Contract.⁵³¹

280. The Tribunal thus concludes that the Claimant was not subject to a 13% reduction in its remuneration for the services provided in the period from July to December 2001 after the expiry of the Contract.

6. The Special Services

281. As with the claims regarding the 10% Fee Cap, the Claimant's claims and the Respondent's defences in respect of payment for the Special Services are entirely contractual in nature. Thus, it is necessary first to identify the issues and the rules applicable to the alleged Special Services under the Contract, before applying these rules to decide on each alleged Special Service.

(a) Issues and Applicable Rules

i. Distinction with instructions under the Contract

282. In respect of audit services, the Committee could issue instructions that the Claimant had to honour pursuant to Clauses 6, 8, 9 and 13 of the Contract. None of these provisions can supply the contractual basis for a remuneration exceeding the flat-percentage fee payable for each individual Inspection Certificate audited, as Clause 21 provides:

The AUDITOR assumes exclusive responsibility for the services that comprise the object of this contract and it shall render them without any kind of employment relationship with the MINISTRY, and it shall not be entitled to receive any benefit, payment, subsidy, compensation or right which is not expressly stipulated or provided for in this contract.⁵³²

283. However, Article 2 of Resolution 1106/98 later established the basis for a distinct remuneration as follows:

When, owing to the nature of the tasks, the amount payable cannot be correlated to certificates of inspection, the audit firm shall draw up a report detailing the costs and fees

⁵³¹ Hearing Tr., Day 7 (14 April 2021), 1075:6-10. ↩

⁵³² Contract, Clause 21 (C-2). ↩

[Page 99]

following normal market practice, which shall be subject to the approval of the [Committee].⁵³³

284. The limitation on the Claimant's remuneration provided in Clause 21 of the Contract may be exceeded only if the conditions set out in Resolution 1106/98 are met. Thus, when an instruction issued by the Committee falls into the category of auditing services provided for in the Contract, the Claimant may not refuse to comply with it and may not require an additional remuneration. If the requested service falls into the category dealt with in Resolution 1106/98, however, the procedure outlined therein applies to remunerate such a service (which has become known and is referred to here as a Special Service).

ii. Scope of application of Resolution 1106/98 ratione materiae

285. Resolution 1106/98 applies to requests for services for which “the amount payable cannot be correlated to certificates of inspection" because of "the nature of the tasks" requested. Resolution 1106/98 thus defines its own subject matter scope of application by reference to the possibility, or not, of correlating the “amount payable [...] to certificates of inspection". The costs and fees to perform this category of services shall be chargeable by "following normal market practice". The legal opinion provided by DGAJ to MECON in June 2001 recognized the distinction between auditing Inspection Certificates and “tasks that [were] especially required by the Executive Committee", for the remuneration of which Resolution 1106/98 provides a legal basis.⁵³⁴

iii. Scope of application of Resolution 1106/98 ratione temporis

286. Resolution 1106/98 was approved on 9 September 1998. It does not provide for retroactive effect.⁵³⁵ Article 3 of Resolution 1106/98 states that it “[would] become effective (NINETY) 90 days after its publication in the Official Gazette [11 September 1998], but might become effective earlier upon the express consent of all the currently qualified inspection companies.”⁵³⁶ There is no evidence in the record of any such agreement.

⁵³³ Resolution 1106/98, Article 2 (C-8) (translation by the Respondent). ↩

⁵³⁴ DGAJ Opinion 1747, June 2001 (C-99) (translation by the Claimant); Hearing Tr., Day 1 (6 April 2021), 51:14-18; Hearing Tr., Day 7 (14 April 2021), 1075:20-1076:11. ↩

⁵³⁵ Resolution 1106/98, Article 3 (C-8). ↩

⁵³⁶ Rejoinder, para. 151 (translation by the Respondent). ↩

[Page 100]

iv. Public procurement regulations

287. The Respondent contends that Resolution 1106/98 could not expand the scope of services covered by the Contract, and that MECON lacked the authority to issue Resolution 1106/98.⁵³⁷ However, within its scope of application, Resolution 1106/98 is the public law authorization to the Committee to procure services for which the amount payable cannot be correlated with the audit of Inspection Certificates. The Respondent cannot be heard to challenge, in its relationship with the Claimant, a formal resolution by invoking a lack of capacity or authority of MECON, at least where such a resolution has not been impugned and set aside by a competent court.

v. Procedure under Resolution 1106/98

288. Article 2 provides for a framework under which it is for the Committee to request a Special Service, for the Claimant to provide the Committee with information “detailing the costs and fees following normal market practice", which the Committee may accept or not. In doing so, it is for the Committee to determine whether to go on or not with its request. Given this procedure, the decision as to whether the requested service qualifies as a Special Service under Resolution 1106/98, or is merely an instruction about how to carry out the audit services, stands to be made in the first place by the Committee, which requests the service.

289. If the Claimant disagrees with the Committee's view based on the nature of the task requested, such a disagreement about the characterization of the requested task as a Special Service should normally arise at the time of the request.

vi. Form of the requests for Special Services

290. Resolution 1106/98 does not require that the Committee's request for a Special Service be in writing or any other specific form. It is, therefore, sufficient to prove by any means that a particular request was made. A request may be made orally and proven by testimony. In any event, good faith can substitute a form requirement if the party relying on non-compliance with a requirement of form is the one who has disregarded it.

⁵³⁷ Rejoinder, para. 156; Second Comadira Report, para. 177; Hearing Tr., Day 7 (14 April 2021), 1121:15-1122:11; Hearing Tr., Day 4 (9 April 2021), 561:11-20. ↩

[Page 101]

vii. Compliance with Resolution 1106/98

291. If the requested service qualifies under Resolution 1106/98, the next step is for the Committee to approve detailed information on the costs and fees quoted by the Claimant. This information must follow the "normal market practice". If such practice is to invoice “costs and fees”, it may be possible to give only an estimate in advance of completing the work, unless a lump sum is to be agreed for the costs and fees, which Resolution 1106/98 does not appear to require.

292. The question then arises as to the legal consequence of the Committee requesting and obtaining a Special Service without following the procedure outlined in Resolution 1106/98. Should the Claimant have refused to perform the service? If it performed the requested service, should it be denied any specific remuneration, or is the Claimant entitled to be remunerated at the normal market price to be determined? The Claimant will still be bound to carry out the requested service (per Clause 9 and 13 of the Contract in particular), but the remuneration for such service will have to be determined.

293. Looking at the Parties' respective responsibilities, it was not the Claimant's responsibility to follow the procedure outlined in Resolution 1106/98 to obtain the service. Rather, that was the Committee's responsibility. The Claimant was bound to comply with, and could rely on, the Committee's requests to prepare and deliver the requested Special Services, whether the Respondent previously requested and approved details as to how the “costs and fees" would be determined following the “normal market practice" referred to in Resolution 1106/98.

294. Furthermore, according to the principle of good faith in dealings between the Administration and private persons, the former could not choose not to observe a procurement requirement and later rely on its non-observance to refuse to pay for the service it has requested and obtained. It is for the Claimant to prove that it could in good faith understand that the Committee requested a Special Service. If the Claimant did not insist on having a costing approved by the Committee before undertaking the work requested by the Committee, the Claimant ran the risk that if the Committee later disagreed about the characterization of the requested service or about the price invoiced, the Claimant may bear the burden of proving (as it demands payment, ultimately in arbitration) that the requested work fell under Resolution 1106/98 and that the price invoiced was “following normal market practice".

295. Most reports include a cover letter which mentions that the report is issued “acorde al Artículo 2º de la Resolución (ex M.E. y O. y S.P.) 1106/98, segundo párrafo, presentado

[Page 102]

oportunamente".⁵³⁸ If such a mention was incorrect, it would appear to be incumbent on the Respondent to dispute it promptly lest it be deemed to have tacitly agreed. As no timely objection is proven in the record, the next question is whether such a mention can override the definition in Resolution 1106/98 of the kind of task which may be invoiced at the market price. The answer is that such a mention does not prevail over public mandatory regulation of Argentina for two reasons. First, an agreement cannot change the scope of application of a public law act. Second, even if it could, the mention refering to the Resolution 1106/98, it accepts that the latter governs the issue of remuneration for Special Services, including all its requirements.

(b) Application of the Rules to the Issues

296. The Claimant claims remuneration for 21 reports, which the Respondent considers to be merely the performance of instructions regarding the audit of Inspection Certificates, not Special Services falling under Resolution 1106/98.

i. Dates of the Special Services

297. Resolution 1106/98 supersedes Clause 21 of the Contract only after it came into force. Resolution 1106/98 was approved on 9 September 1998.⁵³⁹ Before that date, any additional remuneration is ruled out by both Clause 21 of the Contract and public procurement regulations.

298. As a result, even if the Claimant performed a service pursuant to Clauses 9 or 13 of the Contract before 9 September 1998 that would, after that date, fall into the category of Special Services, the remuneration foreseen by Resolution 1106/98 would still not apply. In this scenario, the remuneration for auditing Inspection Certificates is not apposite to the different work done for the Special Service, but there is no basis under the Contract for a remuneration exceeding the flat-percentage fee applying to the audit of individual Inspection Certificates. Thus, the Respondent may have obtained a distinct service having value without having to pay a distinct remuneration to the Claimant. Nonetheless, recovery of the Claimant's costs (without a profit) under the theory of unjust enrichment is ruled out by Clause 21 of the Contract or, in any event, by regulations governing public procurement of services.

⁵³⁸ See for example Report on Imports from Brazil from December 1998 to January 1999, p. 1 (C-132). ↩

⁵³⁹ Rejoinder, paras. 150-151; Resolution 1106/98 (C-8); Hearing Tr., Day 1 (6 April 2021), 96:15-97:5. ↩

[Page 103]

299. The Respondent asserts that the first eight Special Services were undertaken before Resolution 1106/98.⁵⁴⁰ The dates for the Special Services are said to be based on Mr. Santamaría's testimony,⁵⁴¹ but it is not clear where he himself obtained these dates. Mr. Santamaría says that they are "an estimate of when the relevant service was performed”.⁵⁴² Some of these dates are, however, roughly a year earlier than the dates of those eight reports in the record.⁵⁴³ The Claimant's letter to the Committee of 8 October 2003 states dates for some of the Special Services which are earlier than 9 September 1998 (reports regarding Kodak, Asia Imports, Glasses and glassware, Desarrollo y Mantenimiento del Software Capacitación de Usuarios, the latter not being part of the Special Services claimed in the present arbitration), and the letter states two dates (one before and one after 9 September 1998) for the TDK and the Bananas reports; the dates stated for the other reports are after 9 September 1998.⁵⁴⁴

ii. Characterization of the 21 reports

300. The question is whether the information and documentation provided to the Committee as the alleged Special Services, together with the research and the preparation of these reports and the supporting documentation, were already subsumed or implied in the audit of the selected Inspection Certificates performed by the Claimant, so that the Committee's requests for these alleged Special Services were merely requiring communication of supporting information that should in any event have been elicited by the Claimant to perform its audit of selected Inspection Certificates. If, however, the “amount payable” for these services cannot "be correlated to certificates of inspection” (“relacionarse [...] con certificados de inspección”), the services qualify as Special Services under Resolution 1106/98. This assessment needs to be carried out seriatim in respect of each alleged Special Service.⁵⁴⁵

iii. Proof of requests for the Special Services

301. It appears from the Committee's conduct that the alleged Special Services were not volunteered by the Claimant, but that they have been requested orally or in writing by the Committee, as

⁵⁴⁰ Rejoinder, para. 150-151; Statement of Claim, para. 73. ↩

⁵⁴¹ First Santamaria Statement, paras. 38-40, fn. 68. ↩

⁵⁴² First Santamaria Statement, para. 40. ↩

⁵⁴³ See supra para. 76. ↩

⁵⁴⁴ Letter from ICS to the Committee, 8 October 2003, p. 2 (CLEX-15). ↩

⁵⁴⁵ See infra paras. 321-388. ↩

[Page 104]

testified by Mr. Santamaría.⁵⁴⁶ The Respondent does not appear to dispute that the Committee requested the services alleged to be Special Services, but only that they were part of the Claimant's obligations under the Contract, and that anyway eight of them fell outside the temporal scope of Resolution 1106/98.

iv. Approval of detailed information on costs and fees

302. The Respondent states that such a prior approval (which the Committee dispensed with) has never taken place.⁵⁴⁷ It appears from the record that the Committee neither required nor approved prior information as to the costs and fees to be incurred for any of the requested Special Services. The request was made by the Committee ex post facto, once the Committee referred the invoices to SIGEN, which requested proof of strict compliance with the preliminary requirements of Resolution 1106/98.⁵⁴⁸

v. Proof of performance

303. While the Respondent disputes the characterization of the Special Services and the existence of any prior approval of their pricing, it does not dispute that the Claimant delivered the 21 reports. Both the Claimant and the Respondent have exhibited in the present arbitration copies of the reports alleged to be Special Services.⁵⁴⁹ Furthermore, the Respondent also acknowledged that, in addition to the Claimant's audit tasks, the latter had “prepared Special Reports on request from the Executive Committee to arbitrate corrective actions."⁵⁵⁰

304. Furthermore, the Directorate General of Legal Affairs also provided a legal opinion to MECON in June 2001 stating, inter alia, that “there are also tasks that are required by the Executive Committee and may not be related to those [‘the review of inspection documents (Inspection

⁵⁴⁶ First Santamaría Statement, para. 39; Hearing Tr., Day 2 (7 April 2021), 211:21-213:1. ↩

⁵⁴⁷ Rejoinder, para. 177: “the Executive Committee never approved the expenses and fees for the alleged special services, nor did it approve the invoices for such alleged services. 271 [footnote 271 refers to Acosta Second Witness Statement, 8; Cupello Second Witness Statement, § IV.]". ↩

⁵⁴⁸ Letter from the Committee No. 958/2001 to ICS, 4 June 2001, enclosing Letter from SIGEN to the Committee, 30 May 2001 (C-44). ↩

⁵⁴⁹ Claimant exhibits complete copies of 19 of the 21 reports and related work product provided to Argentina in connection with the Claimant's provision of Special Services (C-122 – C-140). The Claimant accepts the Report on Iquique (Chile), Colonia and Montevideo, Uruguay Free Zone (R-137) and the Report regarding Compliance with CEPIPI Article 2, provision No. 4 (R-101) submitted by Argentina as accurate and therefore does not dispute them nor submit another version of these documents. ↩

⁵⁵⁰ Reply, para. 63; Committee Certification No. IPE 164/04, 22 July 2004 (C-98) (translation by the Claimant). ↩

[Page 105]

Certificates)'] [...] It is precisely for these tasks that later by [MECON Resolution] No. 1106 dated 9 September 1998, in section 2 it was established [quoting the wording of Resolution 1106/98]".⁵⁵¹ In 2006, the Committee requested, in order to comply with Resolution 1106/98, supporting evidence of the amounts invoiced by the Claimant for all the reports.⁵⁵² Such requests may be seen as an implied recognition that the reports have been supplied and even that the Claimant has a potential entitlement to be paid under Resolution 1106/98, provided the supporting evidence is satisfactory.

vi. Approval of the invoices

305. When the Committee received the invoices from the Claimant, it referred them to SIGEN,⁵⁵³ which blocked their payment for non-compliance with public regulations, so that the invoices did not reach AFIP for payment.⁵⁵⁴ The Respondent previously approved one of the Claimant's invoices for a Special Service (provided it was restated in Pesos).⁵⁵⁵

vii. Burden of proof as to the remuneration

306. The Claimant seeks reimbursement of its costs to produce the Special Services and a fee, which is calculated as a profit margin of 20 percent. Given that the Respondent has not approved any of the 21 invoices for Special Services except one,⁵⁵⁶ it is incumbent on the Claimant to allege and prove the quantum of these two components of its claim based on the Special Services. Specifically, the Claimant needs to establish a sufficient link between each cost claimed and the work required for the Special Service. It is not for the Tribunal to seek to make that link.

307. The justification for each cost would usually be evidenced in an expense report filed with the company by the person seeking reimbursement of the expense by the company, as well as time-sheets of the persons who worked on a project including a summary description of the work they did. This or equivalent evidence is necessary to prove the justification of the cost allegedly incurred in connection with the Special Service claimed. Lastly, the evidence needs to be

⁵⁵¹ DGAJ Opinion 1747, June 2001 (C-99) (translation by the Claimant); Reply, para. 65. ↩

⁵⁵² Letters from the Committee to ICS, 24 and 25 January and 21 February 2006 (C-57). ↩

⁵⁵³ Reply, paras. 63, 65. ↩

⁵⁵⁴ Rejoinder, para. 171. ↩

⁵⁵⁵ Statement of Claim, para. 199; Letter from the Committee to ICS, 22 August 2002 (C-42); Hearing Tr., Day 1 (6 April 2021), 61:19-62:1. ↩

⁵⁵⁶ Statement of Claim, paras. 87-89; First Santamaría Statement, para. 42. ↩

[Page 106]

commensurate to the amounts claimed, which are high for the Special Services (USD 3,035,071.68 for 21 reports, or an average of USD 144,527.22 for each report).

308. On the other hand, the fact that the Respondent kept requesting more Special Services shows that the Respondent considered them to be of value, and there is no evidence that the Committee stated or even understood at the time that these services would not be remunerated.

viii. Proof of the Claimant's costs

309. The Claimant relies in the present arbitration on the supporting documentation that it had communicated to the Respondent in 2006 at the latter's request.⁵⁵⁷ There is no doubt that effort and expense must have gone into producing each Special Service. However, the relationship between each cost claimed and the Special Service is often not sufficiently shown to make a finding that it is more likely than not that the cost claimed was incurred specifically for the Special Service. The supporting documentation does not include timesheets filled in by each person claimed to have worked on the Special Service with a summary description allowing the Tribunal to make the link between such work and the Special Service. Instead, the time charges are based on assigning a portion of each person's wages to a Special Service, without it being clear how that portion was arrived at.

310. The supporting documentation proves that costs were recorded in the ordinary course of business, and the testimony of Mr. Santamaría provides a foundation for this, such that this evidence is deemed admissible and convincing, in the absence of rebuttal evidence, as to the fact that these costs were actually incurred by the Claimant. However, the allegation that these costs and fees were required to produce the report in question is challenged by the Respondent, and its expert, Mr. Dapena, has shown that the link between the report and the costs and fees claimed is sometimes not proven or is questionable. For instance, Mr. Dapena has identified serious inconsistencies between the costs invoiced and the subject of, or persons involved in, the Special Services.⁵⁵⁸

311. The supporting documentation consists also of invoices from suppliers and subcontractors, travel expenses, and other miscellaneous expenses. However, there is often a lack of the usual cover sheets or expense reports indicating the person having incurred the expense and the purpose or justification for the expense, which would allow one to make the link with the Special Service

⁵⁵⁷ Supporting Files for the Special Services Reports (C-101 – C-121). ↩

⁵⁵⁸ See e.g., Second Dapena Report, para. 242. ↩

[Page 107]

claimed. Many expenses appear to fall into the category of general overheads. The distinction between direct and indirect costs does not assist in finding what costs were incurred specifically for a Special Service. They show that the Claimant incurred the costs, but they do not establish that link.

312. Furthermore, as mentioned, the Respondent has been able to discredit some of the indirect costs claimed, “such as travel expenses and accommodation for company officers who are not included in the personnel payroll presented by ICS as assigned to the alleged Special Services, the fees of certified accountants for the financial statements audits, and even the computation of certain amortizable fixed assets, among other items”.⁵⁵⁹ The Claimant has not been able to rebut these criticisms by the Respondent's expert or to rehabilitate the credibility of its evidence by supplementing it and producing an expert report reviewing and certifying the evidence, which the Tribunal cannot do for the Claimant, who bears the burden of proof.

313. Overall, the evidence is therefore partially insufficient for the purpose of ascertaining the Claimant's costs qualifying under Resolution 1106/98. Without performing itself an expert review of each piece of evidence (almost 5,000 pages in total) contained in the 2006 documentation, the Tribunal will have to apply a discounting factor to the costs claimed. The Tribunal considers that on average the Claimant has proven 90 percent of the costs claimed. A discount of ten percent will consequently be applied to all the invoices that otherwise qualify for remuneration under Resolution 1106/98. This is not an ex aequo et bono determination. It is the application of the law on evidence (burden of proof) as well as the substantive law on damages, which provides that when a debt of damages is owed with certainty, but it is not possible or practicable after the fact to determine its exact amount, the Tribunal must make the closest possible approximation of the quantum, taking into account all relevant considerations based on the evidence available.

ix. Proof of normal market practice as to “fees”

314. The Claimant contends that a profit margin of 15-20% is the normal market practice for its industry, calculated as a percentage of the revenue or sale price (excluding VAT). The Respondent's expert argues that this percentage should be calculated as a percentage of the costs,

⁵⁵⁹ Second Dapena Report, paras. 110, 202 (Table 4), 240-241 (Appendix II) (lease and cleaning services for ICS headquarters, electricity, gas, running water, mobile phone, photocopier rental, monthly rent for parking places, subscriptions to newspapers and magazines, English courses, public relations, ordinary expenses for office supplies, etc). Mr. Dapena further points out serious inconsistencies, and expenses that can hardly be connected with the claimed Special Service, or any other of the Special Services. Second Dapena Report, paras. 242-245. See also Second Dapena Report, para. 108, Picture 8. ↩

[Page 108]

not of revenue. The Tribunal accepts Mr. Santamaría's evidence, based on his professional experience, of a normal market practice of a profit of approximately 20 percent of the costs and fees incurred for the services, as opposed to Mr. Dapena's calculation. However, the profit margin should be calculated on the amount ex VAT, because VAT is a recoverable expense which has been charged to the Respondent.

315. The 20-percent margin of profit is to be applied to each Special Service to the extent that the Claimant has not claimed a lower profit as, if the profit calculated by the Claimant for a given Special Report is a lower percentage, the Tribunal may not grant more than such a lower claimed profit, as it might otherwise run the risk of making an award ultra petita.

x. VAT

316. The Claimant charged VAT on all its invoices for the 21 Special Services, and VAT is included in its claim. The Respondent disputes that such VAT may be passed on to it. Since all these invoices were issued by ICS Inspection and Control Services Limited, a company registered in the UK, and not by the Claimant's Argentinian branch, it appears from the expert evidence in the record that VAT should not be charged on the overall amount of each invoice. This is confirmed by the Claimant's own practice of not having charged VAT on its other invoices for audit services issued by the UK company.⁵⁶⁰ Thus, according to the Respondent, if the Claimant has paid such VAT in Argentina on the Special Services, the damage was self-inflicted, and there is no basis to recover this VAT from the Respondent in the present arbitration.

317. However, as explained by the Claimant:

Mr. Dapena says that the Special Services invoices are incorrectly including VAT. First of all, the Special Services invoices, if we look at them, they don't include any VAT as a separate line item. What they include is VAT on the portion of the costs incurred in Argentina. If you look at the bottom left part of the screen--I don't know if you can see my cursor here--but I'm pointing at the red connector between 14,375 and 3,018. 3,018.93 is the amount of VAT on the Argentina portion of the invoice and only on the Argentina portion of the invoice. And this is a cost to ICS Argentina. And is therefore, being passed on to as a cost as the rest of the costs are in these Special Services invoices, so there is nothing really surprising, and I don't think there is anything incorrect, but I can see at least in the application of VAT on the Special Services invoices, as long as it corresponds only to the Argentina costs. (citations omitted)⁵⁶¹

318. The breakdown of each invoice appearing at page 5 in the supporting documentation for each Special Service, shows that VAT is added only on the portion of the costs and fees performed in

⁵⁶⁰ ICS, Invoices and collection documents (CLEX-16); Hearing Tr., Day 6 (13 April 2021), 991:10-997:1. ↩

⁵⁶¹ Hearing Tr., Day 5 (12 April 2021), 676:11-677:3. ↩

[Page 109]

Argentina and not on the portion performed abroad, when a portion is performed abroad. This is borne out in respect of a number of Special Services.⁵⁶²

xi. Currency

319. The invoices are due in USD as the value currency for the same reasons explained in respect of the other invoices, even though nearly half of the invoices for the Special Services were issued in Pesos and the majority of the costs allegedly incurred by the Claimant were incurred in Pesos.

320. Lastly, the fact that the Claimant's auditors questioned the recoverability of the invoices for the Special Services does not mean that they are not legally owed, which is a determination to be made by the Tribunal.

(c) Individual determinations on the Special Services

321. Based on the above findings, there remains to be assessed whether the date of each report falls within the temporal scope of application of Resolution 1106/98 (i.e., after 9 September 1998), whether the nature of the task qualifies under Resolution 1106/98 (the amount payable cannot be correlated to Inspection Certificates because of the nature of the task), and whether the amount invoiced is justified under Resolution 1106/98 (proven costs and 20 percent profit margin).

322. The topics of each one of the 21 reports claimed as Special Services are briefly described at paragraph 76 above. To assess and adjudicate each alleged Special Service, three documents are particularly relevant: the reports,⁵⁶³ the invoices,⁵⁶⁴ and the supporting documentation;⁵⁶⁵ the latter includes a breakdown of costs and profit for each invoice under “ANEXO I”.

⁵⁶² For instance, this can be seen with the reports on the kiwi imports (invoice at CLEX-16, p. 389, invoice breakdown at C-114, p. 5: no VAT charged on costs and fees abroad), on the Colonia Uruguay Free Zone Report (invoice breakdown at C-115, p. 5), on the Compliance with Article 2, Provision No. 4 of the Committee (invoice at CLEX-16, p. 391, invoice breakdown at C-116, p. 5), on the satellite receivers (invoice at CLEX-16, p. 415, invoice breakdown at C-120, p. 5), and on the Price of Kosher Milk (invoice at CLEX-16, p. 417, invoice breakdown at C-121, p. 5). ↩

⁵⁶³ Special Services Reports (C-122 – C-140, R-137, R-101). ↩

⁵⁶⁴ ICS, Invoices and collection documents, pp. 382-417 (CLEX-16). ↩

⁵⁶⁵ Supporting Files for the Special Services Reports (C-101 – C-121). ↩

[Page 110]

i. “Banana Imports into Argentina”⁵⁶⁶

323. Date of the report: 1 September 1999. Therefore, Resolution 1106/98 applies to this report.

324. Nature of the task: The assignment was to verify whether the FOB price published in a statistical bulletin could be deemed valid in comparison to the average prices for that same product in Ecuador, Brazil, and Argentina.⁵⁶⁷ The nature of this task, which is to investigate other markets for apparently policy considerations, is distinct from auditing any Inspection Certificate, so that its remuneration cannot be correlated with the audit of any Inspection Certificate. Therefore, this report qualifies as a Special Service, and the amount payable must follow normal market practice.

325. Based on the findings made above,⁵⁶⁸ however, the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁵⁶⁶ Report on Banana Imports into Argentina, Ref. No. ICS C/99/17141/ARG, dated 1 September 1999 (C-122, 263 pages). The invoice is found at CLEX-16, p. 382, and the supporting documentation for the invoice is C-101 (116 pages). ↩

⁵⁶⁷ Report on Banana Imports into Argentina, Ref. No. ICS C/99/17141/ARG, 1 September 1999, p. 255 (C-122); Report on Banana Imports into the Argentine Republic, 1 September 1999, pp. 01215-01221, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional - Ministerio de Economía s/ Proceso Ordinario", File No. 1948/12 (R-84). ↩

⁵⁶⁸ See supra paras. 282-320. ↩

⁵⁶⁹ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-101). ↩

[Page 111]

ii. “Analysis of Deficiencies Detected in the Issue of the CIPI”⁵⁷⁰

326. Date of the report: 8 June and 6 July 1999. Therefore, Resolution 1106/98 applies to this report.

327. Nature of the task: Even though the work is based on the physical inspection carried out by the Claimant's employees with respect to specific Inspection Certificates, the task was to identify and analyse flaws in the inspection process and devise improvements which could be implemented in the import pre-shipment audit programme.⁵⁷¹ This task is distinct from auditing individual certificates. Therefore, this report qualifies as a Special Service.

328. Based on the findings made above,⁵⁷² the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁵⁷⁰ Reports on the Deficiencies Detected in the Issuance of Inspection Certificates, 8 June and 6 July 1999 (C-123, 202 pages). The invoice is found at CLEX-16, p. 390, and the supporting documentation for the invoice is C-102 (137 pages). ↩

⁵⁷¹ Report on the Deficiencies Detected in the Issuance of Inspection Certificates, 8 June and 6 July 1999, pp. 123-124 (C-123). ↩

⁵⁷² See supra paras. 282-320. ↩

⁵⁷³ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-102). ↩

[Page 112]

iii. “Special Audit Report – Asia Imports”⁵⁷⁴

329. Date of the report: 31 August 1998. Therefore, Resolution 1106/98, which was approved on 9 September 1998 without retroactive effect, does not apply to this report, so that no remuneration can be charged for it.⁵⁷⁵

iv. Special Report on “Committee Certificates"⁵⁷⁶

330. Date of the report: 28 May 1999. Therefore, Resolution 1106/98 applies to it. However, this report comprises a number of letters pre-dating 9 September 1998.

331. Nature of the task: In any event, the nature of the task does not qualify as a Special Service. The Claimant did not specifically rebut the analysis presented by the Respondent in this respect.⁵⁷⁷ Therefore, this report does not qualify as a Special Service, so that no remuneration can be charged for it.

⁵⁷⁴ Special Audit Report concerning Importations from Asia, pp. 3-4 (C-124). ↩

⁵⁷⁵ Resolution 1106/98, Article 3 (C-8). ↩

⁵⁷⁶ Special Report on the Inspection Certificates not found in the Database of the Committee, 28 May 1999, p. 91 (C-125, 94 pages). The supporting documentation for the invoice is C-104. ↩

⁵⁷⁷ Statement of Defence, paras. 195-200. ↩

[Page 113]

v. “Kodak Study”⁵⁷⁸

332. Date of the report: July-August 1998. Therefore, Resolution 1106/98 does not apply to this report.

333. Nature of the task: In any event, the report was not requested by the Committee. The Claimant spontaneously recommended adding new products in the tariff norms and requesting the Claimant to prepare a report on this topic, in order to increase the goods subject to the Inspection Programme, as argued by the Respondent and not specifically rebutted by the Claimant.⁵⁷⁹ Therefore, this report does not qualify as a Special Service.

vi. “TDK Line Study”⁵⁸⁰

334. Date of the report: 18 May 1999. Therefore, Resolution 1106/98 applies to this report.

335. Nature of the task: As argued by the Respondent,⁵⁸¹ the report reviews the quality of the services provided by pre-shipment inspection companies by studying a sample of Inspection Certificates relating to TDK and SAMSUNG products. The review revealed an important difference between the official price lists surveyed by the Claimant and the FOB values of the imported goods. The Claimant recommended that the Committee penalize inspection companies SGS and SOCOTEC. While the Claimant had to survey extrinsic evidence of prices, it is arguable that this kind of survey is part of the necessary work to audit Inspection Certificates for these products, and the Claimant has not shown the contrary. Therefore, this report does not qualify as a Special Service.

vii. “Chicken Imports Report SADIA S.A.”⁵⁸²

336. Date of the report: 11 February 1999. Therefore, Resolution 1106/98 applies to this report.

337. Nature of the task: The Claimant audited the quality of the Inspection Companies’ services based on four Inspection Certificates issued by Bureau Veritas. For this purpose, the Claimant had to “audit the quality, quantity, tariff classification and customs value of the goods in the certificates

⁵⁷⁸ Study Regarding Kodak Products, July – August 1998, p. 245 (C-126, 252 pages). The supporting documentation for the invoice is C-105. ↩

⁵⁷⁹ Statement of Defence, paras. 201-203. ↩

⁵⁸⁰ Special Report on the tariff codes No. 8523.11.10; 8523.13.20 and 8523.90.00, 18 May 1999, p. 1 (C-127). ↩

⁵⁸¹ Statement of Defence, paras. 204-206. ↩

⁵⁸² Report on Chicken Imports SADIA S.A., 11 February 1999, p. 4 (C-128). The supporting documentation for the invoice is C-107. ↩

[Page 114]

of Importer SADIA ARG S.A.” While the Claimant also had to review extrinsic evidence, it is arguable that this kind of survey is part of the work necessary to audit Inspection Certificates for these products, as asserted by the Respondent,⁵⁸³ and the Claimant has not shown the contrary. Therefore, this report does not qualify as a Special Service within the meaning of Resolution 1106/98.

viii. “Glass and Glassware Study”⁵⁸⁴

338. Date of the report: 18 August 1998. Therefore, Resolution 1106/98 does not apply to this report.

ix. "Marble and Granite San Luis S.A."⁵⁸⁵

339. Date of the report: 29 October 1998. Therefore, Resolution 1106/98 applies to this report.

340. Nature of the task: The Respondent describes this assignment as follows, which has not been specifically rebutted by the Claimant:

This alleged ‘special’ service consists of a two-page letter containing additional information on inspection certificate No. 1-98-013925-0 issued by Surveillance S.A. in regard to importer Mármoles y Granitos de San Luis S.A., with the sole purpose of analyzing the tariff classification.⁵⁸⁶

341. This work appears to be necessary to perform the audit of the Inspection Certificates. Remuneration for this work can be correlated with the audit fee. Therefore, this report does not qualify as a Special Service.

x. "Temporary Imports Study”⁵⁸⁷

342. Date of the report: 17 February 1999. Therefore, Resolution 1106/98 applies to this report.

343. Nature of the task: The purpose of this report was to analyse import operations under the Temporary Import Admission regime, which took place between February 1998 and January

⁵⁸³ Statement of Defence, paras. 207-209. ↩

⁵⁸⁴ Letter from the Claimant to the Committee on the Importations of Soifer Hnos. S.A.I.C. (referred to by the Claimant as Glass and Glassware Study), 18 August 1998, p. 1 (C-129). ↩

⁵⁸⁵ Letter from the Claimant to the Committee on Mármoles y Granitos San Luis S.A., 29 October 1998, p. 1 (C-130). The supporting documentation is C-109. ↩

⁵⁸⁶ Statement of Defence, paras. 213-214. ↩

⁵⁸⁷ Temporary Imports Study, 17 February 1999, p. 2 (C-131). The supporting documentation for the invoice is C-110 (468 pages). ↩

[Page 115]

1999. By its nature, this work goes beyond the audit of, and its remuneration can therefore not be correlated with, any individual Inspection Certificate. Therefore, this report qualifies as a Special Service under Resolution 1106/98.

344. Based on the findings made above,⁵⁸⁸ the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁵⁸⁸ See supra paras. 282-320. ↩

⁵⁸⁹ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-110). ↩

[Page 116]

xi. “Report on Iquique (Chile), Colonia and Montevideo, Uruguay Free Zone”⁵⁹⁰

345. Date of the report: 1999.⁵⁹¹ Therefore, Resolution 1106/98 applies to it.

346. Nature of the task: The Claimant describes its task as follows:

Based on this item redistribution, we have focused the price research task on gathering information about cars and motorcycles, electronic devices, TDK blank cassettes, footwear, textile products and household items. [...] The prices of different products we obtained, the general listings of which are attached as Appendix II, are very useful to check the prices of goods imported from Iquique-Chile to the Argentine Republic.⁵⁹²

347. As the Respondent must admit,⁵⁹³ in this report, the Claimant performed an investigation aimed at determining the business operations pertaining to imports from Iquique (Chile), Colonia, and Montevideo (Uruguay) free zones in 1999. The report describes in some detail how the free zones operate and explains what the trading mechanisms were with respect to these zones, in order to evaluate whether there is undervaluation of the prices of vehicles exported from these zones.

348. By its nature, this work goes beyond the audit of, and its remuneration can therefore not be correlated with, any individual Inspection Certificate. Therefore, this report qualifies as a Special Service under Resolution 1106/98.

349. Based on the findings made above,⁵⁹⁴ the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁵⁹⁰ Report on Iquique, Colonia and Montevideo Free Trade Zones, p. 17 (R-137). The supporting documentation for the invoice is C-111 (336 pages). ↩

⁵⁹¹ Report on Iquique, Colonia and Montevideo Free Trade Zones, p. 17 (R-137). While some costs were incurred in December 1998, most of the costs and fees were incurred in the first quarter of 1999 (C-111), which confirms that the report was issued later in 1999. ↩

⁵⁹² Report on Iquique, Colonia and Montevideo Free Trade Zones, pp. 7-8 (R-137) (translation by the Respondent). ↩

⁵⁹³ Statement of Defence, paras. 218-220. ↩

⁵⁹⁴ See supra paras. 282-320. ↩

⁵⁹⁵ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-111). ↩

[Page 117]

xii. “Brazil Imports, October - December 1998 and January 1999”⁵⁹⁶

350. Date of the report: The cover letter produced in R-95 (consisting of only the text of the report of 15 pages without annexes) is dated 17 February 1999 (and this is the date used in relation to the quotation made by Respondent in the Statement of Defence at paragraph 221), but the cover letter produced in C-132 (consisting of the report and its volumes of annexes, totalling 739 pages) is dated 30 November 2000. Yet, the text of the report produced in the two exhibits is the same. No effort seems to have been made to reconcile the discrepancy between cover letters in the Parties’ submissions; while the cover letter produced in R-95 mentions Chapter 30, which is the topic of a second report prepared in relation to Brazil imports (see xiii infra), the latter report produced at C-133 has a cover letter of 7 December 2000. However, there is no need to investigate the matter further because, whichever cover letter is the correct one for the report produced at C-132 and R-95, this report was made at the earliest in 1999, so that Resolution 1106/98 applies to it.

⁵⁹⁶ Report on Imports from Brazil from December 1998 to January 1999, p. 7 (C-132). ↩

[Page 118]

351. Nature of the task: Assessing the impact that the devaluation of the Brazilian currency against the U.S. dollar had on imports to Argentina.⁵⁹⁷ The Claimant describes the task as follows:

The purpose of this job was to analyse the behaviour and pattern of the import operations from Brazil subject to pre-shipment, as per the request made by the Import Pre-shipment Executive Committee, as a result of the devaluation of the currency of the Federal Republic of Brazil (real), in January of this year. For this reason, we performed a structural analysis of all import pre-shipment inspection certificates (CIPI) issued by the inspection companies during the period between 1 October 1998 and 31 January 1999, the origin of the goods being the aforementioned country.⁵⁹⁸

352. By its nature, this work goes beyond the audit of, and its remuneration can therefore not be correlated with, any individual Inspection Certificate. Therefore, this report qualifies as a Special Service under Resolution 1106/98.

353. Based on the findings made above,⁵⁹⁹ the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁵⁹⁷ Statement of Defence, paras. 221-223; Brazil Imports Report, 17 February 1999, p. 01515, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario”, File No. 1948/12 (R-95). ↩

⁵⁹⁸ Brazil Imports Report, 17 February 1999, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario”, File No. 1948/12 (R-95), p. 01515 (translation by the Respondent). ↩

⁵⁹⁹ See supra paras. 282-320. ↩

⁶⁰⁰ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-112). ↩

[Page 119]

xiii. “Imports Chapter 30, October - December 1998 and January 1999”⁶⁰¹

354. Date of the report: 7 December 2000. Therefore, Resolution 1106/98 applies to this report.

355. Nature of the task: The Respondent explained the nature of the task as follows:

This report was also prepared following the devaluation of the Brazilian currency against the U.S. dollar in 1999, and Claimant’s job again consisted in analysing inspection certificates and comparing them using graphs. The report focused on the tariff positions in Chapter 30 of the Mercosur Common Nomenclature (Pharmaceutical Products).⁶⁰²

356. The Claimant performed a structural analysis of all the Inspection Certificates issued from October 1998 to January 1999 for goods imported from Brazil, in order to identify all goods fitting the tariff position of Chapter 30 and evaluating the trend and the impact of the devaluation on a possible flood of imports into Argentina.

357. By its nature, this work goes beyond the audit of, and its remuneration can therefore not be correlated with, any individual Inspection Certificate. Therefore, this report qualifies as a Special Service under Resolution 1106/98.

358. Based on the findings made above,⁶⁰³ the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁶⁰¹ Report on Imports Chapter 30 from Brazil from December 1998 to February 1999, pp. 7-8 (C-133, 575 pages). The supporting documentation is C-113 (184 pages). ↩

⁶⁰² Statement of Defence, paras. 224-225. ↩

⁶⁰³ See supra paras. 282-320. ↩

⁶⁰⁴ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-113). ↩

[Page 120]

xiv. “Kiwi Imports Study”⁶⁰⁵

359. Date of the report: The report is undated, but the supporting documentation shows that the costs and fees were mostly incurred in June 1999, which shows that the report was issued later in 1999. Therefore, Resolution 1106/98 applies to this report.

360. Nature of the task: The purpose of the report was to analyse the past and future evolution of the international kiwi market, including supply (with a focus on Chile) and demand in Argentina.⁶⁰⁶

361. By its nature, this work goes beyond the audit of, and its remuneration can therefore not be correlated with, any individual Inspection Certificate. Therefore, this report qualifies as a Special Service under Resolution 1106/98.

⁶⁰⁵ Kiwi Imports Study (C-134). The invoice is found at CLEX-16, p. 389. The supporting documentation is C-114 (126 pages), including an invoice breakdown at p. 5. ↩

⁶⁰⁶ Kiwi Imports Study, p. 4 (C-134). ↩

[Page 121]

362. Based on the findings made above,⁶⁰⁷ the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

xv. “Colonia Uruguay Free Zone Report”⁶⁰⁹

363. Date of the report: 20 May 1999. Therefore, Resolution 1106/98 applies to this report.

364. Nature of the task: The Claimant visited the administrative and operational offices of Inspection Companies in the free zone of Colonia in Uruguay to evaluate the quality of their services. By its nature, this work goes beyond the audit of, and its remuneration can therefore not be correlated

⁶⁰⁷ See supra paras. 282-320. ↩

⁶⁰⁸ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-114). ↩

⁶⁰⁹ Colonia Uruguay Free Zone Report, 20 May 1999 (C-135). The supporting documentation is C-115. ↩

[Page 122]

with, any individual Inspection Certificate. Therefore, this report qualifies as a Special Service under Resolution 1106/98.

365. Based on the findings made above,⁶¹⁰ the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁶¹⁰ See supra paras. 282-320. ↩

⁶¹¹ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-115). ↩

[Page 123]

xvi. “Report regarding Compliance with CEPIPI Article 2, provision No. 4”⁶¹²

366. Date of the report: The report is undated, but the supporting documentation shows that the work was performed in 1999, which confirms that the report was issued later in 1999. Therefore, Resolution 1106/98 applies to this report.

367. Nature of the task: The report concerned how best to optimize the functioning of the audit of the pre-shipment inspection programme, including interaction with customs, and ensure effective compliance by the Inspection Companies in view of the requirements introduced by Order No. 4/1999 of the Executive Committee, based on an evaluation of a sample of Inspection Certificates during the period from 15 August 1999 to 31 January 2000.⁶¹³

368. The Respondent emphasizes that the Claimant acknowledged in this report that it was “responsible for expressing an opinion on the said certificates on the basis of [its] audit job”.⁶¹⁴ However, this does not, when taken in context, mean that the preparation of the report was part of the ordinary audit work remunerated by the flat-percentage fee per Inspection Certificate. Furthermore, the scope of the report and the work performed to prepare it go beyond the audit of – and its remuneration can therefore not be correlated with – individual Inspection Certificates. Therefore, this report qualifies as a Special Service under Resolution 1106/98.

369. Based on the findings made above,⁶¹⁵ the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁶¹² Report regarding Compliance with Article 2, Provision No. 4 of the Committee (R-101). Invoice at CLEX-16, p. 391. The supporting documentation is C-116 (426 pages), including an invoice breakdown at p. 5. ↩

⁶¹³ Report regarding Compliance with Article 2, Provision No. 4 of the Committee, p. 4 (R-101). ↩

⁶¹⁴ Statement of Defence, paras. 230-232; Report regarding Compliance with Article 2, provision 4 of the Executive Committee, p. 01370, submitted by ICS as Appendix XXVII to its statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario”, File No. 1948/12 (R-101). ↩

⁶¹⁵ See supra paras. 282-320. ↩

⁶¹⁶ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-116). ↩

[Page 124]

xvii. “Analysis of Imports among Related Companies”⁶¹⁷

370. Date of the report: The report is undated, but the scope of work extends to January 2000. Therefore, Resolution 1106/98 applies to this report.

371. Nature of the task: The Respondent emphasizes that the Claimant acknowledged as follows:

As independent auditors, we inform about the certificates issued by importers who are related to the exporter. These certificates refer to the period from January 1998 to January 2000, this company being responsible for expressing an opinion on said certificates on the basis of our audit job, the scope of which was that specified in section I.C hereof.⁶¹⁸

372. However, this is only the first paragraph of the conclusions in the report, which go on to explain that the task was different from ordinary audit work.⁶¹⁹ In particular, the Claimant analysed

⁶¹⁷ Analysis of Imports among Related Companies, November 1999 – January 2000 (C-136, 506 pages). The supporting documentation is C-117 (272 pages), including an invoice breakdown at p. 5. ↩

⁶¹⁸ Analysis of Imports among Related Companies, p. 01727, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario”, File No. 1948/12 (R-102), p. 01750 (translation by the Respondent in Statement of Defence, paras. 233-235). ↩

⁶¹⁹ Analysis of Imports among Related Companies, November 1999 – January 2000, p. 28 (C-136). ↩

[Page 125]

41,545 Inspection Certificates and identified the many countries of the related companies to draw conclusions and quantify the impact at a global level.

373. Therefore, the sentence quoted by the Respondent does not, when taken in context, mean that the preparation of the report was part of the ordinary audit work remunerated by the flat-percentage fee per Inspection Certificate. The scope of the report and the work performed to prepare it go beyond the audit of - and its remuneration can therefore not be correlated with – individual Inspection Certificates. Therefore, this report qualifies as a Special Service under Resolution 1106/98.

374. Based on the findings made above,⁶²⁰ the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁶²⁰ See supra paras. 282-320. ↩

⁶²¹ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-117). ↩

[Page 126]

xviii. “Item 8703 Imports Investigation”⁶²²

375. Date of the report: The report in Exhibit C-137 is undated, but it is dated 26 December 2005 in Exhibit R-139. Therefore, Resolution 1106/98 applies to this report.

376. Nature of the task: As correctly contended by the Respondent, “[t]his alleged ‘special' service consists in customs clearance of automobile tariff positions entering Argentina through the red channel. This was clearly part of the auditing services that Claimant had to provide, for which it has already been duly paid.”⁶²³ Therefore, this report does not qualify as a Special Service.

xix. “Iquique 2 Report”⁶²⁴

377. Date of the report: The costs and fees have been incurred for this report appear to have been incurred over a period spanning 1999 and 2000. When it was proposed by the Claimant, the report was planned to be completed during March 2001.⁶²⁵ Therefore, Resolution 1106/98 applies to this report.

378. Nature of the task: In response to the Committee’s request of 2 March 2001,⁶²⁶ the Claimant sent a proposal on 16 March 2001, setting forth how the requested report will be realised and how much it will cost (USD 24,849.68), specifying that the report will be prepared pursuant to Article 2 of Resolution 1106/98.⁶²⁷

379. Exhibit C-138 does not contain the text of the report itself, only the annexes (621 pages), and Exhibit R-105 does not contain the report but the Claimant’s proposal to prepare the report. The text of the report itself appears to be missing from the record produced by the Parties.

⁶²² Statistics on Imports of Tariff Item 8703 (automobiles) (C-137, 621 pages). The invoice is found at CLEX-16, p. 413. The supporting documentation is C-118 (273 pages). ↩

⁶²³ Statement of Defence, paras. 236-237. ↩

⁶²⁴ Special Audit Report Concerning the Free Trade Zone of Iquique, 2001 (C-138, R-105). The supporting documentation is C-119 (266 pages). ↩

⁶²⁵ Special Audit Report Concerning the Free Trade Zone of Iquique, 2001, p. 01868 (R-105). ↩

⁶²⁶ Executive Committee’s letter No. 0485, 2 March 2001, p. 01860, submitted by ICS as Appendix XXVII to its amended statement of claim in proceedings “Inspection and Control Services c/ Estado Nacional – Ministerio de Economía s/ Proceso Ordinario”, File No. 1948/12 (R-104). ↩

⁶²⁷ Special Audit Report Concerning the Free Trade Zone of Iquique, 2001 (R-105). ↩

[Page 127]

380. However, the Respondent does not dispute that the report was produced and that it was consistent with the Claimant’s proposal of 16 March 2001. Rather, the Respondent takes issue with the characterization of the report as a Special Service, as follows:

This new report on the free zone of Iquique (Chile) was made following a publication of La Nación newspaper, which reported how goods that had been under-invoiced by Iquique entered the country. The Committee, exercising its powers, requested that Claimant “exhaustively audit the certificates issued by the inspection companies for operations carried out during 2000/20001 from the Iquique (Chile) free zone in order to determine if there were tax losses and the amount thereof”. The Contract provided for the possibility of the Committee giving instructions to audit specific operations. In addition, the job was closely related to the control of inspection certificates, which was one of the main activities of the audit firm. This was clearly part of the auditing services that Claimant had to provide and for which it has already received the respective fees.⁶²⁸

381. However, given that the Claimant’s proposal makes it clear that the report will be prepared as a Special Report under Resolution 1106/98, it is difficult to see how the Respondent can dispute this characterisation. Furthermore, judging by the Claimant’s proposal, as well as the supporting documentation, the scope of the report and the work performed to prepare it go beyond the audit of - and its remuneration can therefore not be correlated with – individual Inspection Certificates. It includes a review of all the Inspection Certificates of 2000-2001 for imports from the free zone of Iquique to perform analyses and surveys based on a sample of Inspection Certificates from the years 1999-2001. Therefore, this report qualifies as a Special Service.

382. Based on the findings made above,⁶²⁹ the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁶²⁸ Statement of Defence, paras. 238-240. ↩

⁶²⁹ See supra paras. 282-320. ↩

⁶³⁰ Supporting Files for the Special Services Reports, p. 5 (invoice breakdown) (C-119). There are two versions of the invoice (CLEX-16, pp. 392-393), as if one corrected the other due to an inversion of two figures in the number. The breakdown uses USD 24,849.68 (i.e., the number at p. 392), and not USD 24,894.68. ↩

[Page 128]

xx. “Satellite Antenna Report”⁶³¹

383. Date of the report: 24 January 2021. Therefore, Resolution 1106/98 applies to this report.

384. Nature of the task: The Claimant identified a strategic alliance with a close commercial relationship between exporter and importer since 1998. The Claimant determined the value of the satellite antennas on the international market and analysed the imports of such products into Argentina, to determine whether the FOB value reported in the Inspection Certificates was within a normal range of value for such goods (the answer being affirmative).⁶³² Contrary to what the Respondent contends,⁶³³ it is not just a matter of simply verifying the price reported in five Inspection Certificates. The scope of the report and the work performed to prepare it go beyond the audit of - and its remuneration can therefore not be correlated with – individual Inspection Certificates. Therefore, this report qualifies as a Special Service.

385. Based on the findings made above,⁶³⁴ the amount claimed must be corrected to arrive at the amount owed by the Respondent as follows:

⁶³¹ Letter from the Claimant to the Committee on the Values Certified by Surveyseed (Satellite Antenna Report), 24 January 2001 (C-139, 159 pages). The supporting documentation is C-120 (110 pages). ↩

⁶³² Letter from the Claimant to the Committee on the Values Certified by Surveyseed (Satellite Antenna Report), 24 January 2001, p. 1 (C-139). ↩

⁶³³ Statement of Defence, paras. 241-243. ↩

⁶³⁴ See supra paras. 282-320. ↩

[Page 129]

xxi. “Rito Kosher Milk Report”⁶³⁶

386. Date of the report: 20 July 2001. Therefore, Resolution 1106/98 applies to this report.

387. Nature of the task: The Respondent correctly points out:

After analyzing inspection certificates, the Committee identified a reduction in the import prices of kosher milk from Uruguay and requested ICS to confirm in its database whether the reduction was justified. After a price audit, Claimant concluded that “USD 0.30 per certified litre is not reasonable". This job was clearly part of the auditing services provided by Claimant under the Inspection Programme, for which it has already received the respective fees.⁶³⁷

⁶³⁵ ICS, Invoices and collection documents, p. 415 (CLEX-16). ↩

⁶³⁶ Letter from the Claimant to the Committee on the Price of Kosher Milk, 20 July 2001 (C-140, 31 pages). The supporting documentation is C-121 (107 pages). ↩

⁶³⁷ Statement of Defence, paras. 244-246. ↩

[Page 130]

388. Therefore, this report does not qualify as a Special Service.

7. Conclusion on the Umbrella Clause claims

389. The Tribunal has concluded above that the Claimant was entitled to the remuneration it has claimed under the Contract and Argentine law, with the exception of the payment claimed on account of the following alleged Special Services (and a discount on account of defective proof):

• “Special Audit Report – Asia Imports”
• Special Report on “Committee Certificates
• “Kodak Study
• “TDK Line Study”
• “Chicken Imports Report SADIA S.A.”
• “Glass and Glassware Study”
• “Marble and Granite San Luis S.A.”
• “Item 8703 Imports Investigation”; and
• “Rito Kosher Milk Report”.

390. Having held above that the Respondent’s obligations undertaken under the Contract are covered by the Umbrella Clause, and that the breach of these obligations under the Contract and Argentine law would also by extension constitute violations of the Umbrella Clause of the Treaty,⁶³⁸ the Tribunal now concludes that the Respondent has violated the Umbrella Clause, giving rise to a right to reparation under the Treaty and international law.

⁶³⁸ See supra paras. 231-233. ↩

[Page 131]

VIII. DEFENCE OF NECESSITY UNDER CUSTOMARY INTERNATIONAL LAW

391. In the event that the Tribunal were to find any breach of the Treaty, the Respondent submits that the defence of necessity under customary international law precludes the unlawfulness of its conduct on account of the severe financial crisis in Argentina in 2001.⁶³⁹ On the other hand, the Claimant contends that the Respondent’s necessity defence is “of no relevance to the claims being advanced by the Claimant” and, in any event, fails to meet the conditions required under international law to invoke such defence.⁶⁴⁰

A. THE RESPONDENT'S POSITION

392. The Respondent submits that necessity may constitute a ground for precluding wrongfulness under customary international law.⁶⁴¹ For the Respondent, the state of necessity forms part of the law applicable to the present dispute pursuant to Article 8(4) of the Treaty.⁶⁴² According to the Respondent, the conditions for invoking the defence have been authoritatively laid down in Article 25 of ILC Articles:⁶⁴³

1. Necessity may not be invoked by a State as a ground for precluding the wrongfulness of an act not in conformity with an international obligation of that State unless the act:
   1. Is the only way for the State to safeguard an essential interest against a grave and imminent peril; and
   2. Does not seriously impair an essential interest of the State or States towards which the obligation exists, or of the international community as a whole.
2. In any case, necessity may not be invoked by a State as a ground for precluding wrongfulness if:
   1. The international obligation in question excludes the possibility of invoking necessity; or
   2. The State has contributed to the situation of necessity.⁶⁴⁴

⁶³⁹ Statement of Defence, para. 440. ↩

⁶⁴⁰ Reply, paras. 156, 164-168. ↩

⁶⁴¹ Statement of Defence, para. 434; Hearing Tr., Day 1 (6 April 2021), 113:8-14. ↩

⁶⁴² Statement of Defence, para. 439. ↩

⁶⁴³ Statement of Defence, para. 437; International Law Commission Draft Articles on Responsibility of States for Internationally Wrongful Acts, annexed to UN General Assembly Resolution 56/83, 12 December 2001, UN Doc. A/RES/56/83 (R-111). See also Hearing Tr., Day 1 (6 April 2021), 113:14-24. ↩

⁶⁴⁴ Statement of Defence, para. 437; International Law Commission Draft Articles on Responsibility of States for Internationally Wrongful Acts, Article 25, annexed to UN General Assembly Resolution 56/83, 12 December 2001, UN Doc. A/RES/56/83 (R-111). ↩

[Page 132]

393. The Respondent submits that the conditions for invoking the defence of necessity under Article 25 of the ILC Articles are fulfilled in the present case.⁶⁴⁵

394. First, the Respondent maintains that the emergency measures it undertook in response to the crisis were the “only way for the State to safeguard” its essential interests against a grave and imminent peril.⁶⁴⁶ It alleges that both the unprecedented recession that Argentina experienced since mid-1998 as well as the crisis that erupted in late 2001 posed “an extremely serious threat to its existence, its political and economic survival, to the possibility of maintaining its essential services in operation, and to the preservation of its internal peace”.⁶⁴⁷ The Respondent avers that a number of international tribunals have recognized as much, including the tribunals in LG&E v. Argentina, Continental v. Argentina, and Metalpar v. Argentina.⁶⁴⁸ The Respondent also refers to the statement of Eduardo Ratti, Legal and Administrative Secretary of the Ministry of Economy in 2002, who confirms that Argentina “had no choice but to adopt the emergency measures that ICS now challenges” and that “[o]ther responses would have resulted in an even deeper economic and financial crisis.”⁶⁴⁹ The Respondent submits that this view is shared by renowned economists and arbitral tribunals.⁶⁵⁰

⁶⁴⁵ Statement of Defence, para. 478. ↩

⁶⁴⁶ Statement of Defence, paras. 445-462. ↩

⁶⁴⁷ Statement of Defence, para. 442; LG&E Energy Corp., LG&E Capital Corp., LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 3 October 2006, paras. 257, 259 (RLA-203). See also Ibid., paras. 445-453. ↩

⁶⁴⁸ Statement of Defence, paras. 445-452; LG&E Energy Corp., LG&E Capital Corp., LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 3 October 2006, paras. 231-236 (RLA-203); Continental Casualty Company v. Argentine Republic, ICSID Case No. ARB/03/9, Award, 5 September 2008, para. 180 (RLA-232); Metalpar S.A. and Buen Aire S.A. v. Argentine Republic, ICSID Case No. ARB/03/5, Award, 6 June 2008, para. 108 (RLA-210). ↩

⁶⁴⁹ Rejoinder, paras. 306-308; Ratti Witness Statement, paras. 14-16, 23-24; Hearing Tr., Day 1 (6 April 2021), 114:5-18. ↩

⁶⁵⁰ Statement of Defence, paras. 454-461; Barry Eichengreen Report submitted in Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia v. Argentine Republic, ICSID Case No. ARB/07/26, 20 May 2013, para. 7 (R-121); Paul Krugman, Reckonings; A Cross of Dollars, New York Times, 7 November 2001 (R-122); Paul Krugman, Argentina’s Money Monomania, December 2001 (R-123); Michael Mussa, Argentina needs effective not unthinking support, Financial Times, 9 November 2001 (R-124); Back from the brink?, The Economist Global Agenda, 16 November 2001 (R-125); LG&E Energy Corp., LG&E Capital Corp., LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 3 October 2006, para. 257 (RLA-203); Hearing Tr., Day 1 (6 April 2021), 114:19-115:15. ↩

[Page 133]

395. Second, the Respondent avers that “no essential interest of any other State or of the international community as a whole was impaired”.⁶⁵¹

396. Third, the Respondent submits that it “did not contribute to the situation of necessity in such a way as to prevent it from invoking it as a ground for precluding wrongfulness under international law”.⁶⁵² Quoting the Commentaries to the ILC Articles, the Respondent asserts that “[f]or a plea of necessity to be precluded [...] the contribution to the situation of necessity must be sufficiently substantial and not merely incidental or peripheral.”⁶⁵³ The Respondent asserts that the crisis did not result from its own actions but from “external shocks” that affected the country since 1997, in particular, the financial and economic crisis in Asia, Russia, and Brazil as well as the decision of the Federal Reserve Board of the United States of increasing interest rates.⁶⁵⁴ The Respondent asserts that from 1998 onwards it began implementing, with the support of international organizations, a number of measures to address the deep recession and avoid an economic collapse.⁶⁵⁵

397. Fourth, the Respondent submits that there is nothing in the Treaty “that excludes the possibility of invoking necessity or limits its invocation in any way”.⁶⁵⁶ To the contrary, the Respondent asserts that in accordance with Article 8(4) of the Treaty necessity forms part of the law applicable to this dispute.⁶⁵⁷

⁶⁵¹ Statement of Defence, para. 477; LG&E Energy Corp., LG&E Capital Corp., LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 3 October 2006, para. 257 (RLA-203). ↩

⁶⁵² Statement of Defence, paras. 463-474. ↩

⁶⁵³ Statement of Defence, para. 463; ILC Commentaries to its Articles on Responsibility of States for Internationally Wrongful Acts, Part One, Commentary to Article 25, in Report of the International Law Commission on the work of its 53rd Session, 2001, Chapter IV, U.N. Doc A/56/10 (RLA-84). ↩

⁶⁵⁴ Statement of Defence, paras. 466-473; Rejoinder, para. 312; Barry Eichengreen Report submitted in Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia v. Argentine Republic, ICSID Case No. ARB/07/26, 20 May 2013, paras. 8-16 (R-121); Joseph Stiglitz, “Whither reform? Towards a new agenda for Latin America”, ECLAC Review, 2003, vol. 80, p. 10 (2003) (R-127); Metalpar S.A. and Buen Aire S.A. v. Argentine Republic, ICSID Case No. ARB/03/5, Award, 6 June 2008, para. 195 (RLA-210); LG&E Energy Corp., LG&E Capital Corp., LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 3 October 2006, paras. 256-257 (RLA-203); Urbaser & CABB v. Argentine Republic, ICSID Case No. ARB/07/26, Award, 8 December 2016, paras. 710-711, 714 (RLA-137). ↩

⁶⁵⁵ Statement of Defence, para. 466; Continental Casualty Company v. Argentine Republic, ICSID Case No. ARB/03/9, Award, 5 September 2008, para. 236 (RLA-232); Rejoinder, para. 312. ↩

⁶⁵⁶ Statement of Defence, para. 476. ↩

⁶⁵⁷ Statement of Defence, para. 476. ↩

[Page 134]

B. THE CLAIMANT'S POSITION

398. The Claimant contends that the Respondent’s necessity defence is “of no relevance to the claims being advanced by the Claimant”.⁶⁵⁸

399. The Claimant notes that Respondent’s necessity defence concerns the measures implemented during Argentina’s financial crisis of 2001-2002, specifically the enactment of the Emergency Law and Decree 214/02.⁶⁵⁹ None of these measures, the Claimant asserts, have been challenged by the Claimant in these proceedings.⁶⁶⁰ It is the Claimant’s submission that none of these measures applied to the Claimant’s rights under the Contract.⁶⁶¹ The Claimant additionally contends that the Respondent’s imposition of the 10% Fee Cap and failure to pay for the special services are unrelated to the measures adopted due to the financial crisis of 2000-2001.⁶⁶²

400. In any event, the Claimant asserts that the Respondent has failed to show that its necessity defence meets the conditions required under international law, as set forth in Gabčíkovo-Nagymaros and in Article 25 of the ILC Articles.⁶⁶³

401. The Claimant notes that numerous tribunals have previously considered and dismissed the Respondent’s necessity defence with respect to the measures undertaken during the financial crisis of 2001-2002.⁶⁶⁴ In the Claimant’s view, a distinction should also be drawn between the

⁶⁵⁸ Reply, para. 156. ↩

⁶⁵⁹ Reply, paras. 157-158. ↩

⁶⁶⁰ Reply, paras. 157-158. ↩

⁶⁶¹ Reply, para. 158. ↩

⁶⁶² Reply, para. 158. ↩

⁶⁶³ Reply, paras. 161-162; Gabčíkovo-Nagymaros Project (Hungary v. Slovakia) [1997] ICJ Rep 7, para. 51 (CLA-199); ILC Articles, Article 25 (CLA-55); Hearing Tr., Day 1 (6 April 2021), 37:19-21. ↩

⁶⁶⁴ Reply, para. 164; CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8, Award, 12 May 2005, para. 331 (CLA-16); Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award, 22 May 2007, para. 313 (CLA-52); Sempra Energy International v. The Argentine Republic, ICSID Case No. ARB/02/16, Award, 28 September 2007, para. 354 (CLA-22); BG Group Plc. v. The Republic of Argentina, UNCITRAL, Final Award, 24 December 2007, para. 411 (CLA-40); National Grid P.L.C v. The Argentine Republic, UNCITRAL, Award, 3 November 2008, para. 260 (CLA-10); Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17, Decision on Liability, 30 July 2010, para. 243 (CLA-202); Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v. Argentine Republic, ICSID Case No. ARB/03/19 and AWG Group Ltd. v. The Argentine Republic, UNCITRAL, Decision on Liability, 30 July 2010, para. 265 (CLA-12); Total S.A. v. The Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability, 27 December 2010, para. 484 (CLA-46); Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/07/17, Award, 21 June 2011, para. 359 (CLA-200); EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Award, 11 June 2012, para. 1171 ↩

[Page 135]

cases concerning an “essential security” exception expressly provided in the applicable BIT⁶⁶⁵ and the cases like the present one in which no such provision is found in the relevant treaty, such that the necessity plea was raised under customary international law.⁶⁶⁶

402. According to the Claimant, the majority of the tribunals that considered the Respondent’s necessity defence on the basis of customary international law have found that the Respondent failed to fulfil the applicable requirements.⁶⁶⁷ In particular, the aforementioned tribunals held that (i) “the economic crisis did not meet the threshold of a grave and imminent peril required under Article 25”;⁶⁶⁸ (ii) “the measures adopted by Argentina were not the only way to address the crisis”;⁶⁶⁹ and (iii) “Argentina contributed to the crisis”.⁶⁷⁰ The Claimant submits that

⁶⁶⁵ (CLA-201); Hochtief AG v. The Argentine Republic, ICSID Case No. ARB/07/31, Decision on Liability, 29 December 2014, para. 301 (RLA-107); Hearing Tr., Day 1 (6 April 2021), 38:15-17. ↩

⁶⁶⁶ Reply, para. 164; Continental Casualty Company v. The Argentine Republic, ICSID Case No. ARB/03/9 (CLA-120); LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1 (CLA-18).. ↩

⁶⁶⁷ Reply, para. 164. ↩

⁶⁶⁸ Reply, para. 165. ↩

⁶⁶⁹ Reply, para. 165(a); CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8, Award, 12 May 2005, paras. 321-322 (CLA-16); Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award, 22 May 2007, para. 306 (CLA-52); Sempra Energy International v. The Argentine Republic, ICSID Case No. ARB/02/16, Award, 28 September 2007, para. 348 (CLA-22); Total S.A. v. The Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability, 27 December 2010, para. 483 (CLA-46). ↩

⁶⁷⁰ Reply, para. 165(b); CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8, Award, 12 May 2005, para. 324 (CLA-16); Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award, 22 May 2007, para. 308 (CLA-52); Sempra Energy International v. The Argentine Republic, ICSID Case No. ARB/02/16, Award, 28 September 2007, para. 350 (CLA-22); Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17, Decision on Liability, 30 July 2010, para. 238 (CLA-202); Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v. Argentine Republic, ICSID Case No. ARB/03/19 and AWG Group Ltd. v. The Argentine Republic, UNCITRAL, Decision on Liability, 30 July 2010, para. 260 (CLA-12); EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Award, 11 June 2012, paras. 1171-1172 (CLA-201); Total S.A. v. The Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability, 27 December 2010, para. 484 (CLA-46). ↩

Reply, para. 165(c); CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8, Award, 12 May 2005, para. 329 (CLA-16); Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award, 22 May 2007. para. 312 (CLA-52); Sempra Energy International v. The Argentine Republic, ICSID Case No. ARB/02/16, Award, 28 September 2007, para. 354 (CLA-22); National Grid P.L.C v. The Argentine Republic, UNCITRAL, Award, 3 November 2008, para. 260 (CLA-10); Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17, Decision on Liability, 30 July 2010, para. 243 (CLA-202); Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v. Argentine Republic, ICSID Case No. ARB/03/19 and AWG Group Ltd. v. The Argentine Republic, UNCITRAL, Decision on Liability, 30 July 2010, para. 265 (CLA-12); Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/07/17, Award, 21 June 2011, paras. 353, 358 (CLA-200); EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Award, 11 June 2012, paras. 1171, 1173 (CLA-201); El Paso