Abgeschickt von rolf am 20 Januar, 2006 um 17:49:13
Date of dispatch to the parties: May 12,2005
INTERNATIONAL CENTRE FOR SETTLEMENT
OF INVESTMENT DISPUTES WASHINGTON, D.C.
IN THE PROCEEDTNG BETWEEN
CMS GAS TRANSMISSION COMPANY (CLAIMANT)
AND
THE ARGENTINE REPUBLIC (RESPONDENT)
CASE NO. ARB/01/8
AWARD
Members of the Tribunal
Professor Francisco Orrego Vicuna, President
The Honorable Marc Lalonde P.C., O.C., Q.C., Arbitrator
H.E. Judge Francisco Rezek, Arbitrator
Secretary of the Tribunal Ms. Margrete Stevens
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cumulatively satisfied; and the State concerned is not the sole judge of whether those
conditions have been met Those conditions reflect customary international law." 165
314. The Claimant asserts next that neither has the Respondent complied with the
conditions set down for the operation of state of necessity under Article 25 of the Articles on
State Responsibility. In the Claimant's view, severe as the crisis was, it did not involve
"grave" or "imminent" peril nor has it been established that the Respondent State did not
contribute to the emergency as most of the causes underlying the crisis were endogenous.
Moreover, it is asserted that the Respondent has not shown that the measures adopted were
the only means available to overcome the crisis.
30. The Tribunal's Findings in Respect of the State of Necessity under Customary International Law
315. The Tribunal, like the parties themselves, considers that Article 25 of the Articles on
State Responsibility adequately reflect the state of customary international law on the
question of necessity. This Article, in turn, is based on a number of relevant historical cases
discussed in the Commentary,166 with particular reference to the Caroline^1 the Russian
Indemnity,l(& Societi Commerciale de Belgique,169 the Torrey Canyon™ and the Gabcikovo-
Nagymaros cases.
316. Article 25 reads as follows:
"1. Necessity may not be invoked by a State as a ground for precluding the wrongfulness of an act not in conformity with an international obligation of that State unless the act:
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(a) is the only way for the State to safeguard an essential interest against a
grave and imminent peril; and
(b) does not seriously impair an essential interest of the State or States
towards which the obligation exists, or of the international community
as a whole;
2. In any case, necessity may not be invoked by a State as a ground for precluding wrongfulness if:
(a) the international obligation in question excludes the possibility of
invoking necessity; or
(b) the State has contributed to the situation of necessity."
317. While the existence of necessity as a ground for precluding wrongfulness under
international law is no longer disputed, there is also consensus to the effect that this ground is
an exceptional one and has to be addressed in a prudent manner to avoid abuse. The very
opening of the Article to the effect that necessity "may not be invoked" unless strict
conditions are met, is indicative of this restrictive approach of international law. Case law,
state practice and scholarly writings amply support this restrictive approach to the operation
of necessity.171 The reason is not difficult to understand. If strict and demanding conditions
are not required or are loosely applied, any State could invoke necessity to elude its
international obligations. This would certainly be contrary to the stability and predictability
of the law.
318. The Tribunal must now undertake the very difficult task of finding whether the
Argentine crisis meets the requirements of Article 25, a task not rendered easier by the wide
variety of views expressed on the matter and their heavy politicization. Again here the
Tribunal is not called upon to pass judgment on the measures adopted in that connection but
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simply to establish whether the breach of the Treaty provisions discussed is devoid of legal consequences by the preclusion of wrongfulness.
319. A first question the Tribunal must address is whether an essential interest of the State
was involved in the matter. Again here the issue is to determine the gravity of the crisis. The
need to prevent a major breakdown, with all its social and political implications, might have
entailed an essential interest of the State in which case the operation of the state of necessity
might have been triggered. In addition, the plea must under the specific circumstances of
each case meet the legal requirements set out by customary international law.
320. In the instant case, the Respondent and leading economists are of the view that the
crisis was of catastrophic proportions; other equally distinguished views, however, tend to
qualify this statement. The Tribunal is convinced that the crisis was indeed severe and the
argument that nothing important happened is not tenable. However, neither could it be held
that wrongfulness should be precluded as a matter of course under the circumstances. As is
many times the case in international affairs and international law, situations of this kind are
not given in black and white but in many shades of grey.
321. It follows that the relative effect that can be reasonably attributed to the crisis does not
allow for a finding on preclusion of wrongfulness. The Respondent's perception of extreme
adverse effects, however, is understandable, and in that light the plea of necessity or
emergency cannot be considered as an abuse of rights as the Claimant has argued.
322. The Tribunal turns next to the question whether there was in this case a grave and
imminent peril. Here again the Tribunal is persuaded that the situation was difficult enough
to justify the government taking action to prevent a worsening of the situation and the danger
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of total economic collapse. But neither does the relative effect of the crisis allow here for a finding in terms of preclusion of wrongfulness.
323. A different issue, however, is whether the measures adopted were the "only way" for
the State to safeguard its interests. This is indeed debatable. The views of the parties and
distinguished economists are wide apart on this matter, ranging from the support of those
measures to the discussion of a variety of alternatives, including dollarization of the
economy, granting of direct subsidies to the affected population or industries and many
others. Which of these policy alternatives would have been better is a decision beyond the
scope of the Tribunal's task, which is to establish whether there was only one way or various
ways and thus whether the requirements for the preclusion of wrongfulness have or have not
been met.
324. The International Law Commission's comment to the effect that the plea of necessity
is "excluded if there are other (otherwise lawful) means available, even if they may be more
costly or less convenient," is persuasive in assisting this Tribunal in concluding that the
measures adopted were not the only steps available.172
325. A different condition for the admission of necessity relates to the requirement that the
measures adopted do not seriously impair an essential interest of the State or States towards
which the obligation exists, or of the international community as a whole. As the specific
obligations towards another State are embodied in the Treaty, this question will be examined
in the context of the applicable treaty provisions. It does not appear, however, that the
essential interest of the international community as a whole was affected in any relevant way,
nor that a peremptory norm of international law might have been compromised, a situation
governed by Article 26 of the Articles.
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326. In addition to the basic conditions set out under paragraph 1 of Article 25, there are
two other limits to the operation of necessity arising from paragraph 2. As noted in the
Commentary, the use of the expression "in any case" in the opening of the text means that
each of these limits must be considered over and above the conditions of paragraph I.173
327. The first such limit arises when the international obligation excludes necessity, a
matter which again will be considered in the context of the Treaty.
328. The second limit is the requirement for the State not to have contributed to the
situation of necessity. The Commentary clarifies that this contribution must be "sufficiently
substantial and not merely incidental or peripheral". In spite of the view of the parties
claiming that all factors contributing to the crisis were either endogenous or exogenous, the
Tribunal is again persuaded that similar to what is the case in most crises of this kind the
roots extend both ways and include a number of domestic as well as international dimensions.
This is the unavoidable consequence of the operation of a global economy where domestic
and international factors interact.
329. The issue, however, is whether the contribution to the crisis by Argentina has or has
not been sufficiently substantial. The Tribunal, when reviewing the circumstances of the
present dispute, must conclude that this was the case. The crisis was not of the making of one
particular administration and found its roots in the earlier crisis of the 1980s and evolving
governmental policies of the 1990s that reached a zenith in 2002 and thereafter. Therefore,
the Tribunal observes that government policies and their shortcomings significantly
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contributed to the crisis and the emergency and while exogenous factors did fuel additional difficulties they do not exempt the Respondent from its responsibility in the matter.
330. There is yet another important element which the Tribunal must take into account.
The International Court of Justice has in the Gabcikovo-Nagymaros case convincingly
referred to the International Law Commission's view that all the conditions governing
necessity must be "cumulatively" satisfied,174
331. In the present case there are, as concluded, elements of necessity partially present here
and there but when the various elements, conditions and limits are examined as a whole it
cannot be concluded that all such elements meet the cumulative test. This in itself leads to
the inevitable conclusion that the requirements of necessity under customary international
law have not been fully met so as to preclude the wrongfulness of the acts.
31. The Emergency Clause of the Treaty
332. The discussion on necessity and emergency is not confined to customary international
law as there are also specific provisions of the Treaty dealing with this matter. Article XI of
the Treaty provides:
"This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests."
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NOW THEREFORE THE ARBITRAL TRIBUNAL DECIDES AND AWARDS AS FOLLOWS
1. The Respondent breached its obligations to accord the investor the fair and equitable
treatment guaranteed in Article II (2) (a) of the Treaty and to observe the obligations
entered into with regard to the investment guaranteed in Article II (2) (c) of the
Treaty.
2. The Respondent shall pay the Claimant compensation in the amount of US$133.2
million.
3. Upon payment of the compensation decided in this Award, the Claimant shall transfer
to the Respondent the ownership of its shares in TGN upon payment by the
Respondent of the additional sum of US$2,148,100. The Respondent shall have up to
one year after the date this Award is dispatched to the parties to accept such transfer,
4. The Respondent shall pay the Claimant simple interest at the annualized average rate
of 2.51% of the United States Treasury Bills for the period August 18, 2000 to 60
days after the date of this Award, or the date of effective payment if before, applicable
to both the value Loss suffered by the Claimant and the residual value of its shares
established in 2 and 3 above. However, the interest on the residual value of the shares
shall cease to run upon written notice by Argentina to the Claimant that it will not
exercise its option to buy the Claimant's shares in TGN. After the date indicated
above, the rate shall be the arithmetic average of the six-month U.S. Treasury Bills
rates observed on the afore-mentioned date and every six months thereafter,
compounded semi-annually.
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5. Each party shall pay one half of the arbitration costs and bear its own legal costs.
6. All other claims are herewith dismissed.
The Arbitral Tribunal
(signed)
(signed)
Marc Lalonde, Arbitrator Date: 15/04/05
Francisco Rezek, Arbitrator Date: 25/04/05
(signed)
Francisco Orrego Vicuna, President Date: 20/04/05