Continental Casualty Company v. The Argentine Republic
ICSID · Investment (ICSID and treaty) · Argentina · 5 Sep 2008
Why it matters
This award is a landmark in investment treaty arbitration for its detailed application of the necessity defense under a BIT's essential security clause. It was one of the first ICSID awards to accept Argentina's necessity defense, distinguishing between the BIT's self-judging clause and customary necessity. The tribunal's analysis of alternatives and contribution to the crisis set a precedent for evaluating economic emergencies.
Summary
Continental Casualty Company, a US insurer, owned CNA ART, an Argentine workers' compensation insurer. During Argentina's 2001-2002 financial crisis, Argentina imposed measures including a bank freeze (Corralito), devaluation, pesification of dollar-denominated contracts, and rescheduling of government debt. Continental claimed these measures violated the US-Argentina BIT, specifically fair and equitable treatment, expropriation, transfer of funds, and the umbrella clause. Argentina defended under Article XI of the BIT, which allows measures necessary for public order or essential security interests, and under customary international law on necessity. The tribunal first upheld jurisdiction. On the merits, it found that Argentina's crisis qualified as a situation threatening essential security interests under Article XI. The tribunal applied a necessity test similar to WTO proportionality analysis, examining whether less restrictive alternatives were available. It held that the Corralito, devaluation, and pesification were necessary, but pesification of government bonds held by CNA was not. The tribunal also found that Argentina did not contribute to the necessity. Consequently, most claims were dismissed. However, the tribunal found a breach of fair and equitable treatment regarding a discriminatory capital gains tax, for which it ordered compensation. The award is significant for its thorough analysis of necessity and its rejection of most claims based on Argentina's emergency measures.
The detail
Parties: Continental Casualty Company v. The Argentine Republic
Case number: ICSID Case No. ARB/03/9
Outcome: Argentina's necessity defense under Article XI of the BIT succeeded; most claims dismissed; Argentina ordered to pay compensation for breach of fair and equitable treatment regarding capital gains tax.
Quantum: Not specified in the provided text; the award ordered compensation for capital gains tax but amount not stated.
Applicable law: Treaty between United States of America and the Argentine Republic concerning the Reciprocal Encouragement and Protection of Investment (1991 BIT); ICSID Convention; international law on state of necessity (ILC Articles).
Issues in play: The BIT's Article XI (essential security interests) and customary international law on necessity (ILC Article 25) were invoked by Argentina. The tribunal had to determine whether Argentina's severe economic crisis justified measures that otherwise breached BIT obligations.
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