Orazul International Espaņa Holdings S.L. v Argentine Republic - ICSID Case No. ARB/19/25 - Award of the Tribunal - Dissenting opinion by arbitrator David R. Haigh KC - English - 14 December 2023
Country
Year
2023
Summary
Source: icsid.worldbank.org
AWARD
Members of the Tribunal
Dr. Inka Hanefeld, President of the Tribunal
Mr. David R. Haigh KC, Arbitrator
Prof. Alain Pellet, Arbitrator
TABLE OF CONTENTS:
A. INTRODUCTION
I. The Parties
II. The dispute
III. The Parties' requests for relief
IV. The Tribunal
V. The languages of the proceedings
VI. The place of the proceedings
VII. The scope of this Award
B. PROCEDURAL HISTORY
C. SUMMARY OF FACTS
I. The liberalization of the Argentine electricity framework
II. The Claimant's interest in Cerros Colorados
III. The 2001 Argentine crisis
IV. Subsequent events after December 2003 affecting the Argentine power generation sector, including FONINVEMEM I, Energía Plus, Energía Delivery Plan, and FONINVEMEM II
V. Subsequent events from 2013 further affecting the Argentine power generation sector
D. OVERVIEW OF THE PARTIES' SUBMISSIONS
I. The Claimant's case
II. The Respondent's case
E. JURISDICTION AND ADMISSIBILITY
I. The burden of proof in relation to matters of jurisdiction and admissibility
1. The Respondent's position
2. The Claimant's position
3. The Tribunal's analysis
II. The Respondent's claim that the Claimant's claims are belated and contrary to general principles of law
1. The Respondent's position
2. The Claimant's position
3. The Tribunal's analysis
III. The Respondent's claim that the Claimant does not fulfill the requirements of Article X of the BIT
1. The Respondent's position
2. The Claimant's position
3. The Tribunal's analysis
IV. The Respondent's claim that the Tribunal lacks jurisdiction ratione personae, ratione materiae and ratione temporis and its allegation that the Claimant abused its rights
1. The Respondent's position
2. The Claimant's position
3. The Tribunal's analysis
a) The Tribunal's jurisdiction ratione personae
b) The Tribunal's jurisdiction ratione materiae
c) The Tribunal's jurisdiction ratione temporis
d) Whether the Claimant has abused its right
V. The Respondent's claim that the Claimant has consented to the contested measures and waived its right to bring any claims concerning the contested measures
1. The Respondent's position
2. The Claimant's position
3. The Tribunal's analysis
a) Waiver
b) Estoppel
VI. Summary of the Tribunal's findings on jurisdiction and admissibility
F. LIABILITY
I. Applicable law
1. The Claimant's position
2. The Respondent's position
3. The Tribunal's analysis
II. The Claimant's claim that the Respondent frustrated the Claimant's legitimate expectations and failed to provide a stable and predictable environment in breach of Article IV(1) of the BIT
1. The Claimant's position
a) The applicable standard
b) Application to the facts
2. The Respondent's position
a) The applicable standard
b) Application to the facts
3. The Tribunal's analysis
a) The applicable standard
b) Application to the facts
III. The Claimant's claim that the Respondent failed to act transparently and to accord due process in breach of Article IV(1) of the BIT
1. The Claimant's position
2. The Respondent's position
3. The Tribunal's analysis
a) Transparency
b) Due process
IV. The Claimant's claim that the Respondent acted arbitrarily in breach of Article
IV(1) of the BIT
1. The Claimant's position
2. The Respondent's position
3. The Tribunal's analysis
V. The Claimant's claim that the Respondent acted discriminatorily in breach of
Article IV(1) of the BIT
1. The Claimant's position
2. The Respondent's position
3. The Tribunal's analysis
VI. The Claimant's claim that the Respondent abused its authority in breach of Article IV(1) of the BIT
1. The Claimant's position
2. The Respondent's position
3. The Tribunal's analysis
VII. The Claimant's claim that the Respondent impaired the Claimant's investments through unjustified and discriminatory measures in breach of Article III(1) of the BIT
1. The Claimant's position
a) The applicable standard
b) Application to the facts
2. The Respondent's position
a) The applicable standard
b) Application to the facts
3. The Tribunal's analysis
a) The applicable standard
b) Application to the facts
VIII. The Claimant's claim that the Respondent failed to protect the Claimant and its investments in breach of Article III(1) of the BIT and Article 4(2) of the Australia-Argentina BIT
1. The Claimant's position
a) The applicable standard
b) Application to the facts
2. The Respondent's position
a) The applicable standard
b) Application to the facts
3. The Tribunal's analysis
a) The applicable standard
b) Application to the facts
IX. The Claimant's claim that the Respondent unlawfully expropriated the Claimant's investments in breach of Article V of the BIT
1. The Claimant's position
a) The applicable standard
b) Application to the facts
2. The Respondent's position
a) The applicable standard
b) Application to the facts
3. The Tribunal's analysis
a) The applicable standard
b) Application to the facts
X. The Claimant's claim that the Respondent failed to observe obligations it entered into with regard to the Claimant's investments in breach of Article IV(2) of the BIT and Article II(2)(c) of the US-Argentina BIT............................................... 230
1. The Claimant's position
a) The applicable standard
b) Application to the facts
2. The Respondent's position
a) The applicable standard
b) Application to the facts
3. The Tribunal's analysis
XI. The Respondent's defense of necessity
1. The Respondent's position
a) The applicable standard
b) Application to the facts
2. The Claimant's position
a) The applicable standard
b) Application to the facts
3. The Tribunal's analysis
G. QUANTUM
I. The Claimant's position
II. The Respondent's position
III. The Tribunal's analysis
H. COSTS
I. The Claimant's position
II. The Respondent's position
III. The Tribunal's analysis
I. DISPOSITIF
A. INTRODUCTION
1. This Award is rendered in a dispute submitted to the International Centre for Settlement
of Investment Disputes (ICSID or the Centre) pursuant to the "Agreement Between
Argentina and the Kingdom of Spain on the Reciprocal Promotion and Protection of
Investments" dated 3 October 1991 (Argentina-Spain BIT or the BIT or the Treaty)
and the "Convention on the Settlement of Investment Disputes between States and
Nationals of Other States", which entered into force on 14 October 1966 and became
binding on Spain on 17 September 1994 and on Argentina on 18 November
(the ICSID Convention).
...
II. The dispute
5. The dispute concerns measures adopted by Argentina since 2003 modifying the Argentine electricity regulatory framework. According to the Claimant, these measures were meant to be temporary and should have been reversed in 2006 or thereafter but never were. They allegedly radically reduced power generators' revenues, created a discriminatory pricing regime, and prevented power generators from collecting their revenues. The Claimant argues that Argentina's measures in the power generation sector harmed its shareholding interest in Argentina and violated multiple provisions of the Argentina-Spain BIT.
6. The Respondent disputes the Tribunal's jurisdiction and the admissibility of the Claimant's claims on various accounts. On the merits, the Respondent states that the Claimant benefited from the electricity market regulations and the agreements voluntarily entered into with the Government. In any event, the Respondent submits that it complied with its obligations under the BIT and that the Claimant's claim is grossly overstated.
III. The Parties' requests for relief
7. The Claimant formulated its requests for relief on jurisdiction in its Rejoinder on
Preliminary Objections as follows:
For the reasons stated herein, Orazul requests an award granting it the following relief:
(a) Dismiss Respondent's Preliminary Objections;
(b) Find that Respondent's invocation of Article X(3) of the Treaty amounts to an abuse of rights;
(c) Order Argentina to pay all the costs of this arbitration, including without limitation, Claimant's legal costs, expert fees and in-house costs, the fees and expenses of the Tribunal, and ICSID's costs; and
(d) Award any further or other relief to which the Tribunal considers that
Claimant has proved an entitlement
8. The Claimant formulated its requests for relief on the merits in its Reply on the Merits as follows:
For the reasons stated herein, Orazul requests an award granting it the following relief:
(a) Declare that Argentina has breached its obligation:
(i) under Article IV of the BIT to accord Orazul and its investments fair and equitable treatment;
(ii) under Article III of the BIT, to refrain from impairing the management, maintenance, use, enjoyment, or disposal of investments through unjustified or discriminatory measures;
(iii) under Article V of the BIT not to expropriate Orazul's investment except if made for the public interest, in accordance with the law, and in no case discriminatory;
(iv) imported through the most-favored nation provision under Article IV(2) of the BIT, to provide full protection and security; and,
(v) imported through the most-favored nation provision under Article IV(2) of the BIT, to observe the obligations it entered into with regard to Orazul's investments.
(b) Order Respondent:
(i) to compensate Orazul for its losses arising from Argentina's breaches of investment protection in the BIT in accordance with Section VI above;
(ii) to pay post-award interest on any damages awarded in this arbitration at a rate to be established during the course of the arbitration; and,
(iii) to pay all the costs of this arbitration, including without limitation, Orazul's legal costs, expert fees, and in-house costs, the fees and expenses of the Tribunal, and ICSID's costs.
(c) Award any further or other relief to which the Tribunal
considers that Orazul has proved an entitlement
9. In its Post-Hearing Brief, the Claimant maintained its requests for relief
10. In its Submission on Costs, the Claimant formulated its request as follows:
For the reasons stated herein, Claimant requests that the Tribunal include in its award an order that:
(a) Respondent reimburse Claimant's costs of the arbitration, including without limitation, Claimant's legal costs, expert fees and in-house costs, the fees and expenses of the Tribunal, and ICSID's costs, as itemized in the Statement of Costs attached to this Submission as Annex A;
(b) Respondent pay interest on such costs as the Tribunal awards at such rate as the Tribunal deems appropriate; and
(c) Award any further or other relief to which the Tribunal considers that
Claimant has proved an entitlement
11. The Respondent formulated its requests for relief on jurisdiction in its Reply on Preliminary Objections as follows:
By virtue of the foregoing, the Argentine Republic requests the Tribunal:
[...]
(b) to dismiss each and every one of Claimant's claims on the grounds that the Tribunal lacks jurisdiction; and
(c) to order Claimant to pay for any costs and expenses arising out of these
arbitral proceedings
12. The Respondent formulated its requests for relief on the merits in its Rejoinder on the Merits as follows:
In view of the foregoing, the Argentine Republic requests that the Tribunal:
[...]
(c) rejects each and every one of Claimant's claims;
(d) orders Claimant to pay all costs and expenses resulting from this
arbitration proceeding
13. The Respondent also formulated its requests for relief in its Post-Hearing Brief as follows:
In the light of the foregoing, the Argentine Republic requests that the Tribunal:
(a) accept the Argentine Republic's objections to the jurisdiction of the Tribunal and the admissibility of Claimant's claims;
(b) in any event, accept the Argentine Republic's responsive arguments, evidence and defences, and reject each and every claim put forward by Claimant; and
(c) order Claimant to pay for all the costs and expenses arising out of this
arbitration proceeding, including without limitation, Respondent's legal
costs, expert fees, in-house costs, the fees and expenses of the Tribunal and
ICSID costs
14. In its Submission on Costs, the Respondent formulated its request as follows:
For all of the reasons set forth above, if the Tribunal finds that Claimant's claims should be dismissed, Respondent respectfully requests that the Tribunal order Claimant to bear all the costs of this proceeding, including those of Argentina, plus interest until the date of payment of such costs.
Should the Tribunal accept any of Claimant's claims, Claimant should still
bear the costs of the proceeding because Claimant's lack of transparency
and procedural misconduct made this proceeding unnecessarily onerous for
Argentina
...
I. DISPOSITIF
1057. For all of the foregoing reasons, the Tribunal decides as follows:
1058. a. The Tribunal has jurisdiction over the Claimant's claims, which are admissible.
By majority view, the Tribunal decides:
b. The Claimant's claims are rejected in their entirety;
c. Each Party shall bear its own costs and half of the arbitration costs; d. All other claims and pleas for relief are rejected.
...
DISSENTING OPINION - DAVID R. HAIGH, KC
A. INTRODUCTION
1. I have had the opportunity to meet with my colleagues on our Tribunal and to consider
their draft Award in this matter. I have no difficulty concurring with their finding that our
Tribunal has jurisdiction and that the Respondent's objections to jurisdiction and
admissibility must be rejected
2. I do not, however, agree with my colleagues (the Majority) on their proposed findings on liability. I have accordingly prepared this Dissenting Opinion to describe to some extent my reasons for this disagreement. In particular, I would find that the Respondent has breached its duty to extend fair and equitable treatment (FET) to the Claimant and should be liable for damages accordingly.
B. FAIR AND EQUITABLE TREATMENT
3. I have a number of points of disagreement with my colleagues' analysis and reasoning and will endeavour to identify some of the more significant of those differences. As I go through my own analysis, I will not attempt to replicate all of the submissions we have received. It is not, therefore, my objective to review all points considered, but rather to give a brief explanation for my disagreement with the Majority.
4. At the outset, I do not accept that the Majority has correctly framed the issue before us based on the Claimant's pleadings. The Majority has stated:2
634.. ..the Claimant argues that the Respondent should have changed the
regulatory framework as applicable in 2003. Specifically, the Claimant claims to
have had the expectation that the market would be `restored' by mid-2006, which is
the basis for the Claimant's damages calculation. In the alternative, the Claimant
submits that it expected the market to be restored at the latest in 2010 when the
two FONINVEMEM I Plants went into operation. Such expectation forms the basis
for the Claimant's alternative damages calculation
635.. ..The relevant question to be determined in this case is rather whether the Claimant had a legitimate expectation that the regulatory framework as existing in 2003 would be modified and, specifically, that it would be modified in the way alleged by the Claimant by mid-2006 or 2010.
5. With respect, in my opinion, this description of the Claimant's case turns the matter on its head. In fact, the real question before us is whether after 2003 the Energy Secretary's express representations that the 2003 regulations were transitory and temporary would be honoured so that certain mandatory parts of the Electricity Law would be restored by 2006 or, at the latest, by 2010.
6. With this framing of the issue, I would find that Argentina failed to act as the Energy
Secretary said he would act. Thus, it is not, as the Majority states, a matter of the Claimant
expecting that the regulatory framework would be modified, but rather that the
regulatory departures from the requirements of the Electricity Law would be merely
transitory, as promised and, accordingly, the Energy Secretary's compliance with the
Electricity Law would be restored.
7. The basic resolutions in place in 2003 unambiguously demonstrate the promise that they were transitory or temporary. In fact, the context was set with Resolution 2/2002 which referenced adoption of "transitory measures."4 The Energy Secretary's Resolution 240/2003, dated 14 August 2003, stated in the fifth whereas clause:5
The provisions in this resolution contain partial and transitory rules which are both necessary and urgent to address the state of emergency affecting the country's economy, in as much as it has a detrimental effect on the WHOLESALE ELECTRIC MARKET (WEM).
...
44. I fully agree with that tribunal's reasoning and see no reason whatsoever to dismiss it on the basis that Total had invested at a different time or in a different economic climate than the Claimant in this case. Their reasoning and condemnation of the Energy Secretary's measures obviously do not turn on when Total invested. As I stated earlier, what remains consistent are the relevant provisions of the Electricity Law and Argentina's duty to extend FET pursuant to the BIT applicable here. I do not accept the Majority's distinguishing of this case from that of Total v Argentina. Accordingly, while my colleagues say that they recognize that "achieving a coherent body of law is an important objective,"54 it is one that in my opinion they have failed to uphold. I would make similar observations about the El Paso v Argentina case and the determination by that tribunal that Argentina's actions breached the FET standard of protection.
45. My colleagues have concluded that, "having reached the finding that the Respondent did not breach any obligations under international law, the Tribunal equally rejects the Claimant's claim for compensation and interest."55 While it is evident that I do not share their finding on liability in this case, I agree that it is pointless to consider the quantum to be awarded. Accordingly, I will not review the requests for damages made by the Claimant. Suffice it to say that I would have awarded the Claimant substantial damages for Argentina's breach of the FET protection under the BIT.
46. I would likewise have awarded the Claimant its full costs of this arbitration as it was successful not only on the jurisdiction of this Tribunal, but should have been successful in its claim on liability.
Mr. David R. Haigh, KC
Arbitrator
Date: 12 December
Footnotes omitted