Metalpar S.A. and Buen Aire S.A. v. The Argentine Republic
ICSID · Investment (ICSID and treaty) · Argentina · 6 Jun 2008
Why it matters
This case is notable for its application of the state of necessity defense in the context of Argentina's 2001-2002 economic crisis. The tribunal rejected the claim on the merits, finding that the claimants failed to prove that the measures caused harm to their investment, which actually improved post-crisis. It underscores the high burden of proof on investors to demonstrate causation and damages in investment treaty claims.
Summary
Metalpar S.A. and Buen Aire S.A., two Chilean companies, invested in Argentina through a subsidiary, Metalpar Argentina S.A., which manufactured bus bodies. Following Argentina's severe economic crisis in 2001-2002, the government adopted emergency measures including currency devaluation, bank deposit freezes, and contract renegotiation. The claimants alleged that these measures violated the Argentina-Chile Bilateral Investment Treaty (BIT), specifically provisions on fair and equitable treatment, expropriation, discrimination, and free transfer of funds. They sought compensation for alleged losses. Argentina argued that the measures were necessary to protect public order and that the claimants failed to prove damages. The ICSID tribunal, after a lengthy procedure, rejected all claims. It found that the claimants did not demonstrate that their investment suffered harm; in fact, Metalpar Argentina S.A. experienced significant growth after the crisis, becoming one of the leading bus body manufacturers in Argentina. The tribunal noted that the claimants' evidentiary shortcomings, including failure to provide adequate financial records, undermined their case. It also declined to award costs, recognizing that Argentina's measures had disrupted the subsidiary's business, even if they ultimately benefited the investment. The award highlights the importance of proving causation and damages in investment arbitration.
The detail
Parties: Metalpar S.A. and Buen Aire S.A. v. The Argentine Republic
Case number: ICSID Case No. ARB/03/5
Outcome: The Tribunal rejected the claim in its entirety, finding that the claimants' investments had not been harmed by Argentina's emergency measures; each party to bear its own costs.
Applicable law: Argentina-Chile Bilateral Investment Treaty (1991, effective 1995); ICSID Convention; ICSID Arbitration Rules
Issues in play: The claimants alleged violations of fair and equitable treatment, expropriation, discrimination, and transfer restrictions under the BIT. Argentina invoked the state of necessity defense under customary international law and the BIT.
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