Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi Universal, S.A. v. Argentine Republic
ICSID · Investment (ICSID and treaty) · Argentina · 30 Jul 2010
Why it matters
This decision is a landmark in investment treaty arbitration for its detailed analysis of the fair and equitable treatment standard and the defense of necessity. It clarified that a state's financial crisis does not automatically excuse breaches of treaty obligations, and set a high bar for the necessity defense. The case also addressed the interaction between BIT provisions on emergency and other treaty protections.
Summary
The case arose from Argentina's 2001-2002 financial crisis, which led to emergency measures that affected a water and sewage concession in Buenos Aires. The concession was granted in 1993 to a consortium including French, Spanish, and UK investors. The concession contract included tariff adjustments linked to a price index, but Argentina froze tariffs and later refused to adjust them, causing financial losses. After failed renegotiations, the concession was terminated in 2006. The investors brought claims under three BITs, alleging expropriation, denial of fair and equitable treatment, and denial of full protection and security. Argentina defended on grounds of necessity and emergency exceptions in the BITs. The Tribunal rejected the expropriation claim, finding no permanent deprivation of property. It also rejected the full protection and security claim, noting that the standard does not cover economic harm from regulatory measures. However, it found that Argentina's actions, including tariff freezes, refusal to adjust tariffs, and termination of the concession, violated the fair and equitable treatment standard by undermining the legitimate expectations of the investors. The Tribunal rejected Argentina's necessity defense, applying the strict conditions of customary international law as codified in the ILC Articles on State Responsibility, and found that Argentina's measures were not the only way to safeguard its essential interests. The decision on damages was deferred to a later phase.
The detail
Parties: Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi Universal, S.A. v. Argentine Republic
Case number: ICSID Case No. ARB/03/19
Outcome: The Tribunal found that Argentina denied 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 and costs were deferred to a later phase.
Applicable law: Argentina-France BIT (1991), Argentina-Spain BIT (1991), Argentina-U.K. BIT (1990), ICSID Convention, UNCITRAL Rules, Vienna Convention on the Law of Treaties, and international law
Issues in play: The case involved a collision between Argentina's obligations under bilateral investment treaties to provide fair and equitable treatment and its right to take emergency measures during a severe financial crisis. The tribunal weighed the treaty protections against the state's necessity defense under customary international law.
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