Data

Date:: 31-10-2011
Country:: International Centre for Settlement of Investment Disputes (ICSID)
Number:: ARB/03/15
Court:: International Centre for Settlement of Investment Disputes (ICSID)
Parties:: El Paso Energy International Company vs The Argentine Republic

Keywords

DISPUTE BETWEEN A UNITED STATES INVESTOR AND THE ARGENTINIAN GOVERNMENT - CONCERNING ALLEGED VIOLATION BY THE LATTER OF BILATERAL INVESTMENT TREATY (BIT) - ARBITRAL TRIBUNAL DECIDED TO APPLY THE BIT AND "INTERNATIONAL LAW, WHEN APPLICABLE" - REFERENCE TO UNIDROIT PRINCIPLES "A SORT OF INTERNATIONAL RESTATEMENT OF THE LAW OF CONTRACTS REFLECTING RULES AND PRINCIPLES APPLIED BY THE MAJORITY OF NATIONAL LEGAL SYSTEMS".

DEFENDANT INVOKING FORCE MAJEURE AS EXCUSE FOR VIOLATION OF BIT - OBJECTION REJECTED ON GROUND OF GENERAL PRINCIPLE OF "PRECLUSION OF WRONGFULNESS" - REFERENCE TO ARTICLES 6.2.2, 7.1.6 AND 7.1.7 UNIDROIT PRINCIPLES

Abstract

Claimant, a United States company, in the mid 1990s had made a number of investments in the energy sector of Respondent, the Republic of Argentina. When at the beginning of the new millenium Argentina underwent a serious financial and economic crisis the Government of Argentina enacted a series of emergency measures designed to limit the negative effects of that crisis, and which to some extent directly affected also Claimant's investments.

Claimant commenced arbitral proceedings at the International Centre for Settlement of Investment Disputes (ICSID), arguing that Respondent had violated the 1991 Treaty Concerning the Reciprocal Encouragement and Protection of Investments between the Republic of Argentina and the United States of America (the "BIT") as well as other Argentinian and international law instruments, and claiming damages for the substantial harm it had suffered as a consequence thereof. Respondent objected that the alleged violations of the BIT were excused in accordance with Article XI of the BIT which provides that "[t]his Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests".

The Arbitral Tribunal, after pointing out that it would apply to the merits of the case the BIT and international law, when applicable, as well as the Argentinian law, decided in favour of Claimant. In rejecting Respondent's objection it invoked the general principle of "preclusion of wrongfulness" which provides that the state of necessity may not be invoked as a ground for precluding wrongfulness if, as was the case of Argentina, the State concerned has itself created that necessity or has significantly contributed to it. In support of this conclusion the Arbitral Tribunal referred among others to the UNIDROIT Principles which it described as "a sort of international restatement of the law of contracts reflecting rules and principles applied by the majority of national legal systems". According to the Arbitral Tribunal under the UNIDROIT Principles exemption from liability for non-performance or other forms of relief are excluded if the party claiming it was "in control" of the situation or if it would be "grossly unfair" to allow for such exemption. In support of this conclusion the Arbitral Tribunal referred in particular to Article 6.2.2 which provides that events causing hardship must be "beyond the control of the disadvantaged Party", to Article 7.1.6 which in the Tribunal's words "prescribes that a party may not claim exemption from liability if it would be grossly unfair to exempt it having regard to the purpose of the contract", and to Article 7.1.7 according to which "force majeure" excuses non-performance of a contract "[...] if that party proves that the non-performance was due to an impediment beyond its control and that it could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences."

Fulltext

Full text available at
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