Sahib Singh is a member of the international litigation and arbitration group at Skadden and a visiting lecturer at the University of Vienna. This note was prepared before the Enron v. Argentina annulment decision became available at the beginning of August. A note on that case is forthcoming on EJIL: Talk!
On 29 June 2010, the ad hoc ICSID Annulment Committee annulled the initial award in Sempra Energy International v. Argentina, finding that the initial tribunal had exercised a manifest excess of powers. The decision is central to our understanding of necessity in international investment law, and particularly the relationship between necessity under Article XI of the Argentina-US BIT of 1991 and under customary international law. Unfortunately, the committee’s decision leaves much to be desired in terms of its interpretive methodology. The central critique of this post, is the degree of relevance the committee’s decision gives to necessity under customary international law when interpreting Article XI. It also questions the presumptive relevance of necessity under custom as an interpretive tool, when the latter can only apply if the investor does not hold substantive or procedural rights under the BIT.
The investor-state arbitration awards concerning Argentina are, for the most part, centred on the Argentine financial crisis that hit the country in late 2001. As a consequence of the crisis, Argentina undertook specific regulatory measures which liquidated the value of foreign investments (the factual matrix is far more complex, but shall not be entered into here). In the spade of investment arbitrations brought by foreign investors, Argentina has argued that it is not liable under a range of BITs due to the defence of necessity. In regards to US investors, such arguments have fallen under both customary international law and Article XI of the Argentina-US BIT. The latter reads as follows:
‘This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfilment of its obligations with respect to the maintenance or restoration of international peace and security, or the protection of its own essential security interests.’
Thus far six rulings have been made on the operation of necessity under Article XI and custom. Read the rest of this entry…