Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v. The Argentine Republic
ICSID · Investment (ICSID and treaty) · Argentina · 30 Jul 2010
Why it matters
This decision is significant for its detailed analysis of the fair and equitable treatment standard in the context of a state's economic crisis, and for rejecting Argentina's necessity defense under customary international law. It clarified that a state's human rights obligations do not automatically override investment treaty protections, and that a state must show that its measures were the only way to safeguard an essential interest and that it did not contribute to the crisis. The case is part of a series of ICSID cases against Argentina arising from its 2001-2003 financial crisis.
Summary
The case concerns a concession for water distribution and wastewater treatment in the Argentine Province of Santa Fe, granted in 1995 to a consortium including Suez, AGBAR, and InterAgua. The concession contract provided for tariff adjustments based on a formula. Following Argentina's severe economic crisis (2001-2003), the Province refused to apply the agreed tariff adjustments, imposed a renegotiation process, and eventually terminated the concession in 2002. The Claimants initiated ICSID arbitration under the France-Argentina and Spain-Argentina BITs, alleging expropriation, denial of fair and equitable treatment, and denial of full protection and security. Argentina raised a defense of necessity under customary international law, arguing that the crisis forced it to take measures to protect essential interests, including the population's right to water. The Tribunal rejected the expropriation claim, finding that the measures did not constitute a permanent deprivation of property. It also rejected the full protection and security claim. However, it found that Argentina violated the fair and equitable treatment standard by failing to revise tariffs as contractually required, imposing a renegotiation that undermined the investment, and unilaterally terminating the concession without adequate compensation. The Tribunal rejected Argentina's necessity defense, holding that Argentina had not shown that the measures were the only way to safeguard its essential interests (as less restrictive alternatives existed) and that Argentina had substantially contributed to the crisis through its own policies. The decision on damages was deferred to a later phase. The case is notable for its thorough analysis of the necessity defense and the interaction between investment treaty obligations and human rights.
The detail
Parties: Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v. The Argentine Republic
Case number: ICSID Case No. ARB/03/17
Outcome: The Tribunal found Argentina liable for denying fair and equitable treatment to the Claimants' investments, but rejected claims of expropriation and denial of full protection and security. The defense of necessity was rejected. Damages were deferred to a later phase.
Applicable law: Argentina-France BIT (1991), Argentina-Spain BIT (1991), ICSID Convention, international law, and the concession contract governed by Argentine law.
Issues in play: The case involved a collision between Argentina's obligations under bilateral investment treaties (BITs) to provide fair and equitable treatment and its defense of necessity based on a severe economic crisis. The Tribunal also considered human rights obligations regarding the right to water, but found no inconsistency with BIT obligations.
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