Siemens A.G. v. The Argentine Republic
ICSID · Investment (ICSID and treaty) · Argentina · 17 Jan 2007
Why it matters
Siemens v. Argentina is a landmark investment treaty case because it was one of the first ICSID awards to find that a state's regulatory measures, taken cumulatively, amounted to a creeping expropriation. The tribunal also set important precedents on the calculation of compensation, including the use of compound interest to achieve full reparation, and on the scope of the umbrella clause. The case is frequently cited in subsequent investment disputes involving Argentina's economic crisis.
Summary
Siemens A.G., a German company, invested in Argentina through its local subsidiary SITS to implement a project for the creation of a national migration and identification system under a contract with the Argentine government. The project was delayed due to various issues, and in 2001, Argentina enacted emergency laws in response to its economic crisis, which effectively terminated the contract and expropriated Siemens' investment. Siemens initiated ICSID arbitration under the Germany-Argentina BIT. The tribunal found that Argentina's actions, including the enactment of Law 25.561 and Decree 486/2002, constituted a creeping expropriation without compensation, violating Article 4(2) of the BIT. It also held that Argentina breached the fair and equitable treatment standard (Article 2(1)) and the prohibition on arbitrary measures (Article 2(3)). The tribunal awarded Siemens compensation based on the book value of its investment as of the date of expropriation (May 18, 2001), plus consequential damages and unpaid bills, with compound interest at 2.66% per annum. The award is notable for its detailed analysis of the umbrella clause, the concept of creeping expropriation, and the use of compound interest to ensure full reparation.
The detail
Parties: Siemens A.G. v. The Argentine Republic
Case number: ICSID Case No. ARB/02/8
Outcome: The Tribunal found Argentina breached the Germany-Argentina BIT by expropriating Siemens' investment without complying with the treaty's terms, failing to accord fair and equitable treatment, and taking arbitrary measures. Argentina was ordered to pay Siemens US$208,440,540 for the value of its investment, US$9,178,000 in consequential damages, and US$219,899 for unpaid bills, plus compound interest.
Quantum: US$217,838,439 plus interest
Applicable law: Germany-Argentina Bilateral Investment Treaty (BIT) of 1991; ICSID Convention; Argentine law
Issues in play: The case involved the interaction between the BIT's expropriation and fair and equitable treatment provisions and Argentina's sovereign right to regulate public services. The tribunal had to determine whether Argentina's measures constituted a creeping expropriation and whether they violated the treaty's standards.
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