Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. Argentine Republic
ICSID · Investment (ICSID and treaty) · Argentina · 25 Feb 2016
Why it matters
This case is significant for its detailed analysis of damages in investment arbitration, particularly the use of a 6% compounded interest rate instead of the claimant's proposed WACC. The dissenting opinion raises important questions about the 'loser pays' principle in investor-State arbitration and the standard of compensation. It also addresses the valuation of losses during a period of economic crisis.
Summary
Mobil Exploration and Development Argentina Inc. Suc. Argentina and Mobil Argentina Sociedad Anónima (collectively 'Mobil') initiated ICSID arbitration against the Argentine Republic under the US-Argentina BIT. Mobil alleged that Argentina's emergency measures during its 2001-2002 economic crisis, including the abandonment of the peso-dollar peg and renegotiation of public utility contracts, violated the BIT's protections. In a 2013 Decision on Liability, the tribunal found Argentina liable for breaching the fair and equitable treatment standard. The quantum phase focused on calculating damages. Mobil sought compensation for losses from January 2002 to April 2004, using a discounted cash flow method with a WACC of 10.4%. Argentina argued that no damages were due because Mobil's investments remained profitable. The tribunal appointed an independent expert, Nils Janson. The award, issued on 25 February 2016, rejected Mobil's WACC and applied a 6% compounded annual interest rate as a conservative measure. The tribunal ordered Argentina to pay compensation (the exact quantum is not specified in the excerpt) and contribute USD 2 million to Mobil's costs. Arbitrator Remiro Brotóns dissented, arguing that the compensation was excessive, the interest rate too high, and that the 'loser pays' costs order was inappropriate in investor-State arbitration. He contended that each party should bear its own costs absent abusive conduct. The case illustrates the challenges of valuing damages in sovereign debt crises and the ongoing debate over cost allocation in investment treaty arbitration.
The detail
Parties: Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. Argentine Republic
Case number: ICSID Case No. ARB/04/16
Outcome: Argentina was ordered to pay compensation to Mobil for breaches of the US-Argentina BIT.
Quantum: USD 2,000,000 (partial costs) plus compensation for damages (quantum not specified in excerpt, but the award fixed compensation; the dissenting opinion suggests the amount was substantial)
Applicable law: Treaty between the United States of America and the Argentine Republic concerning the Reciprocal Encouragement and Protection of Investment (1991); ICSID Convention; international law; Argentine law.
Issues in play: The case involved the collision between Argentina's sovereign right to regulate in response to its economic crisis and the investor's right to fair and equitable treatment and protection against expropriation under the BIT. The tribunal had to determine whether the measures breached the treaty and how to quantify damages.
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