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Casinos Austria International GmbH and Casinos Austria Aktiengesellschaft v. Argentine Republic (ICSID)

Why it matters

This case is a landmark for its detailed analysis of the boundary between legitimate regulation and indirect expropriation in the context of license revocation. The tribunal applied a proportionality test, considering whether the state's action was a bona fide exercise of police powers or a disguised taking. It also addressed the relevance of due process and the investor's legitimate expectations, reinforcing that severe sanctions must be proportionate to the alleged violations.

Summary

The dispute arose from the 2013 revocation of a 30-year exclusive gaming license held by ENJASA, an Argentine company majority-owned by Austrian investors Casinos Austria International GmbH and Casinos Austria Aktiengesellschaft. The license was granted in 1999 by the Province of Salta to operate casinos and lotteries. Claimants alleged that the revocation was arbitrary, politically motivated, and violated the Austria-Argentina BIT, specifically the expropriation and fair and equitable treatment provisions. Argentina argued the revocation was a legitimate sanction for ENJASA's repeated violations of anti-money laundering rules and unauthorized involvement of other operators. The tribunal, after a detailed factual review, found that while ENREJA (the provincial gaming regulator) had the power to revoke the license, the revocation was disproportionate to the violations. The tribunal noted that ENREJA had not followed due process, had imposed the harshest sanction without considering lesser penalties, and that the decision was influenced by a plan to oust ENJASA. The tribunal concluded that the revocation constituted an indirect expropriation without compensation, breaching Article 4(1) and (2) of the BIT. It awarded USD 21,660,000 in damages (based on discounted cash flow valuation) plus interest at 4% compounded annually from the date of expropriation (13 August 2013), and ordered Argentina to pay all arbitration costs and Claimants' legal fees. One arbitrator dissented on liability and quantum.

The detail

Parties: Casinos Austria International GmbH and Casinos Austria Aktiengesellschaft v. Argentine Republic

Case number: ICSID Case No. ARB/14/32

Outcome: Tribunal found Argentina breached Article 4(1) and (2) of the Austria-Argentina BIT by unlawfully expropriating Claimants' investment; awarded USD 21,660,000 plus interest and costs.

Quantum: USD 21,660,000

Applicable law: Agreement between the Republic of Austria and the Republic of Argentina for the Promotion and Protection of Investments (BIT), signed 7 August 1992, in force 1 January 1995; ICSID Convention; international law; Argentine law.

Issues in play: The case involved the tension between Argentina's regulatory police powers (to revoke a gaming license for alleged violations) and the investor's right to protection against expropriation under the BIT. The tribunal distinguished between a non-compensable regulatory measure and an unlawful expropriation, applying a proportionality test.

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