CMS Gas Transmission Company v. The Republic of Argentina
ICSID · Investment (ICSID and treaty) · Argentina · 12 May 2005
Why it matters
CMS v. Argentina is a landmark investment treaty case that established key principles for the interpretation of fair and equitable treatment and the defence of necessity in the context of economic crises. It was one of the first ICSID awards against Argentina arising from its 2001-2002 financial crisis, setting a precedent for dozens of subsequent claims. The Tribunal's rejection of Argentina's necessity defence clarified the high threshold for invoking that defence under customary international law, influencing later awards and contributing to the development of investment treaty jurisprudence.
Summary
CMS Gas Transmission Company, a US company, owned a minority stake in Transportadora de Gas del Norte (TGN), an Argentine gas transportation company. In the 1990s, Argentina privatized its gas sector and granted TGN a license that guaranteed tariffs calculated in US dollars, adjusted periodically according to a US price index (PPI), and converted to pesos at the time of billing. After Argentina's severe economic crisis in 2001-2002, the government enacted emergency laws that abolished the dollar-based tariff system, froze tariffs, and pesified the economy. CMS claimed that these measures violated the US-Argentina Bilateral Investment Treaty (BIT), specifically the fair and equitable treatment, expropriation, and umbrella clauses. Argentina argued that its measures were justified by a state of necessity under customary international law and the BIT's non-precluded measures clause. The Tribunal, constituted under ICSID, first upheld jurisdiction in a 2003 decision, confirming that CMS as a minority shareholder could bring a claim. On the merits, the Tribunal found that Argentina breached the fair and equitable treatment standard by fundamentally altering the regulatory framework that CMS had relied upon, but rejected claims of expropriation and violation of the umbrella clause. The Tribunal also rejected Argentina's necessity defence, holding that the crisis did not meet the stringent conditions of Article 25 of the ILC Articles on State Responsibility, as Argentina had contributed to the crisis and other measures were available. The Tribunal awarded CMS US$133.2 million in damages, calculated using the discounted cash flow method, plus pre- and post-award interest. The award was later subject to annulment proceedings, which upheld the liability finding but reduced the damages slightly.
The detail
Parties: CMS Gas Transmission Company v. The Republic of Argentina
Case number: ICSID Case No. ARB/01/8
Outcome: The Tribunal found Argentina liable for breaching the fair and equitable treatment standard under the US-Argentina BIT and ordered Argentina to pay CMS US$133.2 million in damages plus interest.
Quantum: US$133.2 million plus interest
Applicable law: Treaty between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment (1991 US-Argentina BIT); ICSID Convention; Argentine law (including Gas Law No. 24.076 and Convertibility Law); international law on state responsibility.
Issues in play: The case involved a collision between Argentina's obligations under the BIT to provide fair and equitable treatment to foreign investors and Argentina's right to adopt emergency measures to address its severe economic crisis. The Tribunal applied the customary international law defence of necessity under Article 25 of the ILC Articles on State Responsibility.
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