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SAUR International SA v. Republic of Argentina (ICSID)

Why it matters

This case is significant for its detailed analysis of valuation methodologies in investment arbitration, particularly the use of discounted cash flow (DCF) analysis and the determination of appropriate interest rates. It also reaffirms the principle that states must compensate foreign investors for indirect expropriation and breaches of fair and equitable treatment, even in the context of economic crises.

Summary

SAUR International S.A., a French company, invested in Obras Sanitarias de Mendoza S.A. (OSM), a water and sanitation company in the Argentine province of Mendoza, through an equity investment and a technical assistance agreement. After Argentina's economic crisis, the province intervened in OSM, terminated the concession, and transferred it to a state entity. SAUR initiated ICSID arbitration under the France-Argentina BIT. In a 2012 decision, the tribunal found Argentina liable for indirect expropriation and violation of fair and equitable treatment. The 2014 award on damages determined compensation using a discounted cash flow (DCF) method, valuing SAUR's equity investment at USD 37,990,111 and its technical assistance investment at USD 2,000,000, totaling USD 39,990,111. The tribunal applied a 6% annual compound interest rate from the date of expropriation (17 September 2007) until payment. Argentina was also ordered to pay USD 686,500 and EUR 1,486,975 in costs. The award is notable for its thorough analysis of valuation principles, including the use of DCF, the treatment of regulatory risk, and the calculation of compound interest.

The detail

Parties: SAUR International SA v. Republic of Argentina

Case number: ICSID Case No. ARB/04/4

Outcome: Argentina ordered to pay SAUR International USD 39,990,111 plus interest and costs.

Quantum: USD 39,990,111 plus interest and costs

Applicable law: France-Argentina BIT (1991); ICSID Convention; Argentine law

Issues in play: The case involved the fair and equitable treatment standard and expropriation under the BIT, with the tribunal finding that Argentina's intervention and termination of a water concession amounted to indirect expropriation and a violation of fair and equitable treatment.

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