INTERNATIONAL CENTRE FOR SETTLEMENT
OF INVESTMENT DISPUTES
WASHINGTON, D.C.
DECISION ON JURISDICTION
ICSID CASE No. ARB/01/12
AZURIX CORP.
Claimant
v.
THE ARGENTINE REPUBLIC
Respondent
Before the Arbitral Tribunal composed by:
Dr. Andrés Rigo Sureda (President)
Sir Elihu Lauterpacht, C.B.E. Q.C. (Arbitrator)
Dr. Daniel H. Martins (Arbitrator)
Secretary of the Tribunal
Claudia Frutos-Peterson
Washington, D.C., December 8, 2003
2
TABLE OF CONTENTS
I. PROCEDURAL BACKGROUND.....................................................................................4
II. THE FACTS......................................................................................................................10
III. POSITIONS OF THE PARTIES ......................................................................................11
1. First objection to jurisdiction - agreement to the jurisdiction of the courts of La Plata and
waiver of all other fora......................................................................................................12
2. Second objection to jurisdiction – the dispute submitted by Azurix has already been
submitted to the courts of Argentina under Article VII of the BIT (“fork-in-the-road”
argument) ..........................................................................................................................19
3. Azurix does not have ius standi ........................................................................................22
4. Additional consequences alleged by Argentina ................................................................23
5 Additional request .............................................................................................................24
IV. APPLICABLE LAW.........................................................................................................25
V. CONSIDERATIONS ........................................................................................................26
1. Preliminary Considerations...............................................................................................26
a) Attempt at amicable settlement.....................................................................................29
b) Consent by the parties to the jurisdiction of ICSID ......................................................30
c) National of another Contracting Party ..........................................................................30
d) Legal dispute .................................................................................................................31
e) Dispute arising directly out of an investment................................................................31
2. Ius standi ...........................................................................................................................36
3. First objection to jurisdiction - agreement to the jurisdiction of the courts of La Plata and
waiver of all other fora......................................................................................................40
4. Second objection to jurisdiction – the dispute has already been submitted to the courts of
Argentina under Article VII of the BIT (“fork-in-the-road” argument) ...........................45
5. Alleged additional consequences ......................................................................................49
3
a) Forum non conveniens ..................................................................................................49
b) Determination of the scope of rights under the Concession Agreement and
performance of regulatory functions.............................................................................50
c) Abuse of process ...........................................................................................................50
d) Economic impact...........................................................................................................51
e) Alter ego issue...............................................................................................................51
f) Double recovery............................................................................................................52
VI. DECISION ........................................................................................................................52
4
DECISION ON JURISDICTION
I. PROCEDURAL BACKGROUND
1. On September 19, 2001, the Claimant, Azurix Corp., a corporation incorporated
in the State of Delaware of the United States of America (hereinafter “Azurix” or “the
Claimant”), filed a request for arbitration against the Respondent, the Argentina Republic
(hereinafter “Argentina” or “the Respondent”), with the International Centre for Settlement of
Investment Disputes (hereinafter the “Centre”). Azurix claims that Argentina has violated
obligations owed to Azurix under the 1991 Treaty Concerning the Reciprocal Encouragement
and Protection of Investment between the Argentine Republic and the United States of America
(hereinafter “the BIT”; bilateral investment treaties in general will be referred to as BITs),
international law and Argentine law in respect of Azurix’s investment in a utility which
distributes drinking water and treats and disposes of sewerage water in the Argentine Province of
Buenos Aires. Azurix alleges such breaches were made by Argentina both directly through its
own omissions and through the actions and omissions of its political subdivisions and
instrumentalities.
2. The Secretary-General of the Centre registered Azurix’s request for arbitration on
October 23, 2001. On November 12, 2001, the parties agreed the Tribunal would consist of three
arbitrators, one to be appointed by each party and the third arbitrator and President of the
Tribunal to be appointed by the Chairman of the Administrative Council of the Centre.
Accordingly, Sir Elihu Lauterpacht, C.B.E. Q.C. and Dr. Daniel H. Martins were appointed
arbitrators by the parties and Dr. Andrés Rigo Sureda was appointed President after consultation
5
with the parties. On April 8, 2002, the Tribunal was deemed to have been constituted and the
proceedings to have commenced. On the same date, in accordance with ICSID Administrative
and Financial Regulation 25, the parties were notified that Ms. Claudia Frutos-Peterson, Counsel,
ICSID, would serve as Secretary of the Arbitral Tribunal. The Tribunal held its first session in
Washington D.C. on May 16, 2002.
3. Mr. R. Doak Bishop of King & Spalding and Mr. Guido Santiago Tawil of M &
M Bomchil represent the Claimant, and Mr. Bishop represented the Claimant at the first session.
Dr. Horacio Daniel Rosatti, Procurador del Tesoro de la Nación Argentina, represents the
Respondent, and Mr. Hernán Cruchaga and Ms. Andrea G. Gualde of the Procuración del Tesoro
de la Nación, Buenos Aires, acting on instruction from the then Procurador del Tesoro de la
Nación, Dr. Ruben Miguel Citara, represented the Respondent at the first session.
4. At the first session, the parties agreed that the Tribunal had been properly
constituted and that they had no objection to any of the members of the Tribunal, and it was
noted that the proceedings would be conducted under the ICSID Arbitration Rules in force since
September 26, 1984 (hereinafter “the Arbitration Rules”). In respect of the pleadings to be filed
by the parties, their number, sequence and timing, it was announced after consultation with the
parties that the Claimant would file its Memorial within 150 days of the date of the first session,
the Respondent would file its Counter-Memorial within 150 days of the date of receipt of the
Memorial, the Claimant’s Reply would be filed within 60 days of the date of receipt of the
Counter-Memorial, and the Respondent’s Rejoinder would be filed within a further 60 days of its
receipt of the Reply. It was further noted by the Tribunal that, in accordance with the Arbitration
Rules, the Respondent had the right to raise any objections it might have to jurisdiction no later
6
than the expiration of the time limit fixed for filing its Counter-Memorial. If such objection to
jurisdiction were made by the Respondent, it was agreed that the above timetable would be
resumed following the resumption of any proceedings on the merits.
5. Azurix filed its Memorial on October 15, 2002, claiming that Argentina had
breached the BIT by expropriating its investment by measures tantamount to expropriation
without prompt, adequate and effective compensation (Article IV(1)), by failing to accord to it
fair and equitable treatment, full protection and security, and treatment required by international
law (Article II(2)(a)), by taking arbitrary measures that impaired Azurix’s use and enjoyment of
its investment (Article II(2)(b)), by failing to observe obligations Argentina entered into with
regard to Azurix’s investment (Article II(2(c)), and by failing to provide transparency concerning
the regulations, administrative practices and procedures and adjudicatory decisions that affect
Azurix’s investment (Article II(7)). In addition, Azurix requested orders for the payment of
compensation for all damages suffered and the adoption by Argentina of all necessary measures
to avoid further damages to Azurix’s investment. Azurix expressly reserved its right to request
the decision of provisional measures under Article 47 of the ICSID Convention and Arbitration
Rule 39.
6. On March 7, 2003, Argentina filed a Memorial on jurisdiction raising two
objections to the Tribunal’s jurisdiction. The first was that Azurix agreed to submit this dispute
to the courts of the city of La Plata and waived any other jurisdiction and forum; the second was
that Azurix had already made a forum selection under Article VII of the BIT by submitting the
dispute to Argentine courts.
7
7. In accordance with Arbitration Rule 41(3), the Tribunal suspended the proceeding
on the merits on March 12, 2002, and set dates for filing pleadings on jurisdiction: Azurix to file
a Counter-Memorial on jurisdiction within 60 days of receipt of Argentina’s Memorial on
jurisdiction; Argentina to file a Reply with 30 days of receipt of the Counter-Memorial, and
Azurix to file its Rejoinder within a further 30 days of receipt of Argentina’s Reply.
8. By letter dated March 12, 2003, Azurix requested the Tribunal to join the
jurisdictional issue to the merits. On March 21, 2003, the Tribunal invited Argentina to
comment on this request. The Tribunal received Argentina’s observations on March 27, 2003.
Azurix replied to Argentina’s observations on April 2, 2003, and the Tribunal confirmed, on
April 4, 2003, that the proceedings on the merits would remain suspended until the jurisdictional
issue had been addressed.
9. Azurix filed its Counter-Memorial on jurisdiction on May 13, 2003.
10. On June 10, 2003, Argentina requested an extension for filing its Reply on
jurisdiction until August 4, 2003 because of the institutional succession in the Argentine
government. Taking into account the circumstances, and after having given the Claimant an
opportunity to comment on the request, the Tribunal granted it on June 16, 2003, and informed
the parties that the Claimant would be entitled to an equivalent extension if requested.
11. Dr. Horacio Daniel Rosatti informed the Tribunal, on July 1, 2003, that he had
been appointed Procurador del Tesoro de la Nación.
8
12. Azurix filed a request for provisional measures on July 15, 2003 (dated July 14,
2003), subsequently supplemented by two letters dated July 21 and 28, 2003. The request sought
a provisional measure recommending that Argentina refrain from incurring by itself or through
any of its political subdivisions in any action or omission capable of aggravating or extending the
dispute, taking into account especially the reorganization of Azurix’s Argentine subsidiary,
Azurix Buenos Aires S.A. (hereinafter “ABA”), or any other measure having the same effect.
13. At the request of the Tribunal, Argentina filed observations on Azurix’s request
for provisional measures on July 24, 2003, seeking dismissal of the request for provisional
measures together with costs and requesting that the Tribunal request the Claimant to produce an
original copy of the Decision of the Appeals Chamber of the Province of Buenos Aires.
14. The Tribunal, in a decision of August 6, 2003, rejected Azurix’s request for
provisional measures, considering that, in the circumstances of the case and at that stage of
proceedings, it was not in a position to recommend the specific measure requested or to propose
others with the same objective. The Tribunal did, however, invite the parties to abstain from
adopting measures of any character which could aggravate or extend the controversy submitted
to arbitration, and took note of statements made by Argentina affirming that the Province of
Buenos Aires (hereinafter “the Province”) recognizes that the receivables for services rendered
by ABA before March 7, 2002 belong to ABA, and that those collected or to be collected in the
future have been or will be deposited in a special banking account, and that the situation
described in Azurix’s request would not affect the enforceability or execution of any award
rendered on the merits. The Tribunal postponed its decision on costs in respect of the
9
provisional measures request to a later stage of the proceedings and considered it unnecessary to
request the Claimant to furnish the Tribunal with the Decision of the Appeals Chamber.
15. Argentina filed its Reply on jurisdiction on August 4, 2003. Azurix filed a
Rejoinder on jurisdiction on August 29, 2003.
16. The hearing on jurisdiction took place in London on September 9 and 10, 2003.
The parties were represented by Messrs. R. Doak Bishop, Guido Santiago Tawil, Ignacio
Minorini Lima and Craig S. Miles, on behalf of the Claimant. Messrs. Carlos Ignacio Suárez
Anzorena, and Jorge Barraguirre, and Ms. Beatriz Pallarés, from the Procuración del Tesoro de
la Nación, and Mr. Osvaldo Siseles, from the Secretaría Legal y Administrativa del Ministerio de
Economía y Producción, represented the Respondent.
17. At the hearing, the Respondent requested that the Tribunal, should it decide that it
has jurisdiction, increase to 90 days the deadline for the Respondent to file its Counter-Memorial
on the merits. The President of the Tribunal invited the representatives of the Claimant to
comment on the request. They opposed the request, having regard to the extensions already
granted to the time periods agreed for the submission of memorials at the first session. During
the hearing the Tribunal informed the parties that it took note of the request of the Respondent
and the observations made by the Claimant and that it would decide this matter at a later date.
18. On October 14, 2003, the Tribunal followed up on the petition of Argentina under
Article 1 of the Protocol of the BIT that the Claimant produce evidence of ownership or control
of the investment consistent with Article I(1)(a) of the BIT. On October 21, 2003, the Claimant
complied with the Tribunal’s request.
10
II. THE FACTS
19. In 1996 the Province commenced the privatization of the services of
Administración General de Obras Sanitarias de la Provincia de Buenos Aires (hereinafter
“AGOSBA”), the Province owned and operated company which provided potable water and
sewerage services in the Province. The Province passed Law 11.820 to create the regulatory
framework for privatization of AGOSBA’s water services. The future operator of the water
services would be granted a concession which would be overseen and regulated by a new
regulatory authority established for the purpose, Organismo Regulador de Aguas Bonaerense
(hereinafter “ORAB”). The concessionaire was required to be a company incorporated in
Argentina.
20. The privatization process was conducted by the Privatization Commission, which
tendered the concession on the international market on the basis of Law 11.820 and of a set of
contract documents prepared in accordance with the same law by ORAB, including the Bidding
Terms and Conditions and a draft Concession Agreement.
21. The bid offer was made by two companies of the Azurix group of companies
established for this specific purpose, Azurix AGOSBA S.R.L. (hereinafter “AAS”) and
Operadora de Buenos Aires S.R.L. (hereinafter “OBA”). AAS and OBA are indirect subsidiary
companies of Azurix. AAS is registered in Argentina and is 0.1% owned by Azurix and 99.9%
owned by Azurix Argentina Holdings Inc. (a company incorporated in Delaware), which in turn
is 100% owned by Azurix. OBA, also registered in Argentina, is 100% owned by Azurix
Agosba Limited which is registered in the Cayman Islands, and which is in turn 100% owned by
11
Azurix Agosba Holdings Limited, also registered in the Cayman Islands. Azurix owns 100% of
the shares in Azurix Agosba Holdings Limited.
22. Having successfully won their bid, AAS and OBA incorporated ABA in
Argentina to act as concessionaire. On June 30, 1999, ABA paid a “canon payment” of
438,555,554 Argentinean pesos (hereinafter the “Canon”) to the Province.1
On payment of the
Canon, ABA, AGOSBA and the Province executed the Concession Agreement which granted
ABA a 30 year concession for the distribution of potable water and the treatment and disposal of
sewerage in the Province. Handover of the service took place on July 1, 1999.
III. POSITIONS OF THE PARTIES
23. The Respondent makes two principal objections to jurisdiction:
-Azurix agreed to the jurisdiction of the courts of La Plata over all
disputes and waived all other fora: - all the contractual documentation
relevant to the investment provides for the jurisdiction of the
administrative courts of La Plata (provincial courts) and waives the
jurisdiction of any other forum or jurisdiction, including that of an ICSID
tribunal; and
-“fork-in-the-road” argument under Article VII of the BIT: - by its alter
ego ABA, Azurix has made an election under Article VII of the BIT to
submit the dispute to the jurisdiction of the local courts of the Argentine
Republic by pursuing judicial review and legal proceedings in those fora.
1
At the time the Canon was paid the Argentine Peso was fixed in a one to one ratio with the United States dollar.
The Argentine Peso was pegged to the US dollar until December 31, 2001, when “pesification” was implemented by
Argentina in response to its economic crisis.
12
24. The Respondent also claims that the Claimant has no ius standi to bring this
dispute before the Tribunal since it is an indirect shareholder of ABA.
25. In the course of arguing the two principal objections, the Respondent raises a
number of incidental points, primarily in respect of assumed consequences if the Tribunal finds it
has jurisdiction. These points appear to raise distinct issues not necessarily related to the
objection headings under which they are made and therefore the Tribunal will address them
separately.
1. First objection to jurisdiction - agreement to the jurisdiction of the courts of La
Plata and waiver of all other fora
26. Each of the forum selection clauses in the contractual documentation relating to
the investment provides for all disputes under or relating to the Concession Agreement to be
submitted to the courts for contentious-administrative matters of the city of La Plata:
-Clause 1.5.5 of the Bidding Terms and Conditions (hereinafter “the
Bidding Terms”), “Commitments”, provides for the exclusive jurisdiction
of the courts for contentious-administrative matters of the city of La Plata
“for all disputes that may arise out of the Bidding, waiving any other
forum, jurisdiction or immunity that may correspond.”2
-Clause 2.16 of the Bidding Terms, “Jurisdiction”, provides that the “court
for contentious-administrative matters of the city of La Plata shall have
2
Argentina’s Memorial on Jurisdiction, para. 34. (Emphasis in the original).
13
jurisdiction over all matters arising out of the Bidding, waiving any other
forum, jurisdiction or immunity that may correspond.”3
-Clause 16.7 of the Concession Agreement provides that “In the event of
any dispute regarding the construction and execution of the Agreement,
the Grantor [the Executive Authorities of the Province of Buenos Aires]
and the Concessionaire [ABA] submit to the court for contentiousadministrative
matters of the city of La Plata, expressly waiving any other
forum or jurisdiction that may correspond due to any reason.”4
-The Claimant itself agreed in the commitment letters titled “Commitment
and Guarantee of the Operator’s Controlling Company” and the
“Commitment Letter and Guarantee of the Group’s Controlling Company”
(hereinafter “the Commitment Letters”) that “we submit to the jurisdiction
of the courts … of the city of La Plata … in the event of any dispute
arising out of the application or interpretation of these presents and
expressly waive any other forum or jurisdiction.”5
-The Privatization Commission stated in Clarifying Circular 11(A) that the
jurisdiction of any disputes between the parties is the courts of the city of
La Plata, and clarified that the Bidding Terms expressly provide a waiver
of any other forum or jurisdiction. The statement was made in response to
the question of one bidder which, noting the jurisdiction clause in the
Bidding Terms, requested clarification that Argentina would keep its
3
Ibid., para. 35. (Emphasis in the original).
4
Ibid., para. 38. (Emphasis in the original).
5
Ibid., paras. 39-45. (Emphasis in the original).
14
commitments under BITs to which it is a party and which provide for
international arbitration.6
27. (The Bidding Terms, the Concession Agreement, the Commitment Letters and the
Clarifying Circular 11(A) will hereinafter be referred to as the “Contract Documents”).
28. The Respondent disagrees with recent arbitral precedents7
which have held that
contractual jurisdiction clauses do not preclude the jurisdiction of international tribunals under an
international treaty on the grounds that they fail to recognize the pacta sunt servanda principle,
and ignore the contract terms the parties have agreed to as well as Article 26 of the ICSID
Convention “which allows the agreement to the contrary regarding the presumption that all local
remedies must not be exhausted.”8
29. The Respondent further argues that, in any event, this case is distinguishable from
the recent case law cited because of the express waiver of any forum other than the courts of the
city of La Plata for issues related to the Concession Agreement, and such waiver includes the
possibility of reference to international arbitration of a dispute under the Concession
6
Ibid., paras. 46-48.
7
Compañía de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, (ICSID Case No. ARB/97/3)
16 ICSID Rev.-FILJ 641 (2001), Salini Construttori S.p.A. et Italstrade S.p.A v. Kingdom of Morocco, (ICSID Case
No. ARB/00/4), Decision on Jurisdiction, 23 July 2001, 129 Journal de Droit International (2002), and Lanco
International Inc. v. Argentine Republic, Preliminary Decision on Jurisdiction, 8 December 1998, 5 ICSID Rep. 367
(hereinafter Vivendi I, Salini and Lanco, respectively), paras. 53 and ff of Argentina’s Memorial on Jurisdiction.
8
Argentina’s Memorial on Jurisdiction, paras. 58-59. Article 26 of the ICSID Convention provides that “Consent of
the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration
to the exclusion of any other remedy. A Contracting State may require the exhaustion of local administrative or
judicial remedies as a condition of its consent to arbitration under this Convention”.
15
Agreement.9
The Claimant was aware of the scope of the agreed waiver.10
The Respondent
refers to the Calvo Clause and argues, citing the late Judge Jessup, that rights under international
law that pertain to an individual can be waived by the individual, that is, Azurix can and did
waive its rights under the BIT. Argentina cites Woodruff v. Venezuela (hereinafter Woodruff)11
and North American Dredging Company of Texas v. United Mexican States (hereinafter North
American Dredging)12
as authority supporting its argument that a specific waiver of jurisdiction
in a contract overrides the jurisdiction of an international tribunal under a treaty, and that an
individual can waive such rights, other than those relating to diplomatic protection and denial of
justice.13
30. The Respondent also contends that the Claimant is bound by the terms of the
Bidding Terms and Conditions and the Concession Agreement through its owned subsidiaries,
AAS and OBA, which took part in the bidding because: (a) the companies “were simply
instrumentalities and constituted a simple alter ego”; (b) Azurix itself made written
representations during the bidding process in the form of the Commitment Letters; and (c)
Azurix acknowledged the “direct connection” by the wording it used in its Memorial.14
9
Ibid., para. 60.
10
Ibid., para. 61.
11
Woodruff v. Venezuela, RIAA, volume IX, Hague ICJ Register, p. 213.
12
North American Dredging Company of Texas v. United Mexican States, RIAA, volume IV, Hague ICJ Register, p.
26.
13
Argentina’s Memorial on Jurisdiction, paras. 62-73.
14
Ibid., paras. 55-57.
16
31. In its Counter-Memorial on jurisdiction the Claimant rejected Argentina’s
allegations. To summarize the Claimant’s arguments, the jurisdiction and waiver provisions of
the Contract Documents are limited to normal breach of contract claims and do not require
submission of a BIT claim to local courts, and Argentina ignores the distinction between the host
State party’s obligations under a BIT in respect of an investment in that State and the obligations
contained in the contract documentation underlying the investment.
32. The Claimant continues: the terms of the jurisdiction clause in the Bidding Terms
limit the jurisdiction clause to “disputes arising under the Bidding Terms”, and “Bidding” is
defined as the “selection procedure that is governed by the Bidding Terms until the Concession
Agreement is signed”, so the Terms no longer applied once the Concession Agreement entered
into force.15
Similarly, the jurisdiction clause of the Concession Agreement applies to disputes
regarding “the construction and execution of the [Concession] Agreement”, that is, it does not
apply to claims arising under the BIT.16
The Commitment Letters’ jurisdiction provisions relate
only to “these presents”, i.e., the undertakings required to ensure that OBA had the requisite
technical knowledge or access to it and that Azurix would abstain from changing the ownership
structure of ABA for six years and keep the Province reasonably informed of changes in
common control for a period of twelve years from the date of the Concession Agreement. The
Commitment Letters did not bind Azurix to the Bidding Terms or the Concession Agreement.17
15
Claimant’s Counter-Memorial on Jurisdiction, paras. 34-38.
16
Ibid., paras. 40-41.
17
Ibid., paras. 45-50.
17
33. Moreover, there is no mutuality between the ABA’s current claims before the
local courts and Azurix’s claim before the Tribunal under the Convention because both the
claims and the parties are different: (i) the parties to the Bidding Terms are the Province, AAS
and OBA, not Azurix and Argentina; (ii) the Commitment Letters signed by Azurix (the only
Contract Documents signed by Azurix) were undertakings to ensure OBA complied with its
obligations as the qualified technical operator under the Bidding Terms; (iii) Argentina is not a
beneficiary of the undertakings given by Azurix in the Commitment Letters; and (iv) the
Concession Agreement was signed by the Province, AGOSBA and ABA, the latter being the
Argentine incorporated subsidiary appointed concessionaire under the Agreement as required by
the Bidding Terms.18
34. Further, clarifying Circular 11(A) cannot have the effect attributed to it by
Argentina because: (i) the Privatization Commission did not answer the question put to it; (ii)
both the question and the answer related to the Bidding Terms only; (iii) any waiver of
investment rights must be express and unequivocal (citing North American Dredging) and no
such express and unequivocal waiver can be found in the question and answer in Circular 11(A);
(iv) the provincial body which answered the question in Circular 11(A), the Privatization
Commission, was unable to modify or repeal treaty commitments entered by Argentina; (v)
treaties prevail over local regulations and the Province lacks the capacity to alter or rescind treaty
obligations; and (vi) only Argentina can decide whether its constituent subdivisions or agencies
18
Ibid., paras. 22-26.
18
may have standing before an ICSID tribunal, and no such designation was made by Argentina in
respect of the Province.19
35. Additionally, under Argentina’s constitutional structure, local provincial courts
lack both subject matter and personal jurisdiction over the Federal Government to entertain BIT
claims – only federal courts have such jurisdiction. Therefore, the scope of the choice of forum
provisions is limited to contract claims.20
In any case, Azurix has the choice under Article
VII.2(3) of the BIT to submit its dispute to ICSID or in accordance with any pre-agreed dispute
settlement procedure.21
36. According to the Claimant, ICSID tribunal decisions in Lanco and Salini, the
award in Vivendi I, and the decisions of the ad hoc Committees in respect of Compañía de Aguas
del Aconquija S.A. and Vivendi Universal v. Argentine Republic (hereinafter “Vivendi II”)22
and
Wena Hotels Ltd v. Egypt23
support a finding of jurisdiction in this case.24
19
Ibid., paras. 54-80.
20
Ibid., paras. 82-89, and 91-92.
21
Ibid., paras. 93-101.
22
Compañía de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, Decision of the ad hoc
Committee of July 3, 2002, 41 ILM 1135 (2002).
23
Wena Hotels Ltd v. Egypt, Decision of the ad hoc Committee of February 5, 2002, 41 ILM 933 (2002).
24
Claimant’s Counter-Memorial on Jurisdiction, paras. 102-148.
19
2. Second objection to jurisdiction – the dispute submitted by Azurix has already been
submitted to the courts of Argentina under Article VII of the BIT (“fork-in-theroad”
argument)
37. Argentina argues that the Tribunal’s jurisdiction is excluded because Azurix has
already submitted this dispute to the Argentine courts and thus exercised the jurisdictional option
under Article VII of the BIT. Five administrative appeals (twelve since then)25
have been made
by ABA and the dispute between the ABA and the Province over the termination of the
Concession Agreement has been submitted to the Court of Justice of the Province. Further,
Argentina claims that Azurix and ABA acknowledge in their pleadings in the case before that
Court that the basis of the legal action is identical to that brought before the ICSID Tribunal.26
38. In response, the Claimant alleges that Argentina overlooks the existence of causes
of action before the Tribunal which are independent of the Concession Agreement and
erroneously concludes that Azurix has submitted claims to administrative tribunals and
provincial courts for the purposes of the BIT. Furthermore, the parties and subject matter of the
proceedings before the Argentine courts and the Tribunal are not the same.27
39. The Claimant disputes that ORAB - the body hearing the administrative review
claims - qualifies as a court or administrative tribunal for the purposes of Article VII of the BIT
and Argentine law.28
ORAB was constituted as a regulator, not as a judicial body with power to
25
Argentina’s Memorial on Jurisdiction, paras. 78-79 and footnote 69 in Claimant’s Rejoinder on Jurisdiction.
26
Ibid., paras. 80-85.
27
Claimant’s Counter-Memorial on Jurisdiction, paras. 154, 159 and ff.
28
Ibid., para. 158.
20
determine disputes; and, in respect of ABA, it is only reviewing prior decisions it has made and
is not acting as an impartial judicial body. Argentine federal courts have held that bodies
constituted in the same way as ORAB lack the capacity to exercise judicial type functions,
except in specific circumstances. Even where they do, the courts have been reluctant to label
them as “administrative tribunals”, and exercise of any such power is limited to disputes between
private parties. In any case, Azurix’s rights under the BIT were not involved in any way in the
reviews.29
40. The Claimant further alleges that the request for arbitration was filed with the
Centre before the local court proceedings were initiated and therefore, under the terms of the
jurisdiction provisions of the BIT, no choice of fora can be implied by Azurix’s action.30
In any
case, ABA filed the local action specifically to protect its position under provincial law.31
It has
asked the court to abstain from pursuing the proceeding any further because Azurix has chosen
to pursue arbitration under the BIT before an ICSID Tribunal32
although Azurix acknowledges
that “the BIT does not impose any requirement on ABA to waive or suspend its claims before
local courts in order for Azurix to pursue its separate and independent claims for violations of the
29
Ibid., paras. 167-175.
30
Ibid., paras. 180-182. See also footnote 69 in Claimant’s Rejoinder on Jurisdiction for a list of cases before the
Supreme Court of the Province.
31
Ibid., para. 183.
32
Ibid., paras. 183-186.
21
BIT before ICSID”. 33
In any case, ABA is obligated under the relevant company legislation to
take all possible legal action necessary to protect its shareholders.34
41. In its Rejoinder, Argentina’s reply to Azurix’s arguments in so far as it raises new
points not previously made by Argentina, can be summarized as follows:
-Azurix’s assertion that the Province cannot limit or modify any
international agreement is basically true but it is irrelevant because Azurix
was free to contract out of its rights (by way of waiver) as an investor
under the BIT, which it did. The possibility of such a waiver has been
acknowledged by the Ad hoc Committee in Vivendi II. Argentina has not
alleged that Azurix has waived the ICSID jurisdiction as such, but that it
has “waived the right to put forward controversies in terms of said
investments related to the interpretation and performance before the
forums set forth under the Treaty” and this cannot be recast by Azurix as a
refusal to apply the law by Argentina (because the Provincial courts do not
have jurisdiction over Argentina). In any case, Azurix has a remedy
through ABA using the mechanisms in the Concession Agreement.35
-Argentina refutes Azurix’s claim that the court actions before the
Province were exclusively aimed at protecting its legal position because:
(i) ABA is requesting an order nullifying ORAB’s regulatory decisions;
(ii) the filings before both tribunals are identical as to their substance; and
(iii) ABA is not protecting its shareholders.36
33
Ibid., para. 198.
34
Ibid., paras. 187-188.
35
Argentina’s Rejoinder on Jurisdiction, paras. 93-108.
36
Ibid., paras. 128-131.
22
3. Azurix does not have ius standi
42. In its Rejoinder, Argentina has raised, as a subsidiary objection that, if Azurix is
not one and the same personality as ABA - in which case it would be a party to ABA’s
agreements as to jurisdiction of the courts of La Plata and the waiver of other dispute settlement
fora - then it is only a shareholder of ABA with no ius standi to bring this dispute under the BIT.
Argentina is claiming that Azurix is “trying to have it both ways”: Azurix is “washing its hands”
of its subsidiaries’ obligations by using the BIT to penetrate the juridical personalities of the
local companies yet also attempting to cut loose from the jurisdictional commitments entered by
those companies on the basis of its separate legal identity. In Argentina’s view, Azurix’s
subsidiaries are alter egos and, therefore, it cannot cut itself free of the contractual commitments
entered by those companies.37
43. If, on the other hand, Azurix is only a shareholder of ABA, it lacks ius standi to
put forward indirect claims relating to such company’s contractual rights. Argentina notes in its
Rejoinder on Jurisdiction that in general BITs have not modified the rule that shareholders are
not entitled to bring claims for damages suffered by the company in which they have shares
(indirect claims). Argentina argues that under Articles 1(a)(ii), II(4) and VII(8) of the BIT the
local companies are an investment and can be parties to ICSID procedures. If Azurix does not
argue that ABA is an “investment” within the BIT definitions, then its only investment is the
37
Ibid., paras. 3-4, 16.
23
shares in ABA and, accordingly, it has no ius standi to claim for damages sustained by ABA for
alleged breaches of contract.38
44. In response, Azurix claims that, under Arbitration Rule 41, the ius standi
objection should have been first raised by Argentina in its Memorial on jurisdiction and,
therefore, it is untimely. Any entitlement Argentina had to raise the objection was waived when
it failed to do so.39
Nonetheless, Azurix rejects these contentions, relying on the terms of the
Convention and the BIT to show that it has standing to bring this dispute before the Tribunal.
4. Additional consequences alleged by Argentina
45. In addition to the arguments outlined above, Argentina makes a number of
additional points which, because they do not obviously fall under the objections of ius standi
headings, the Tribunal will deal with them separately. Most of the points made are assumed
consequences of the Tribunal finding that it has jurisdiction. The Tribunal summarizes these
points as follows:
-The Tribunal is forum non conveniens for the Province and could entail
the denial of justice to the Province which is not a party to the proceeding
and is also a creditor of ABA.40
-The possible adverse economic impacts of Azurix’s overall strategy, inter
alia: ABA is making itself insolvent to the detriment of its creditors such
as the Province; ABA’s receivables in respect of its debtors and creditors,
38
Ibid., paras. 9 and 14.
39
Claimant’s Rejoinder on Jurisdiction, paras. 14-20.
40
Argentina’s Memorial on Jurisdiction, para. 77.
24
including the Province, have been pesified, yet Azurix formulates its
claims in US dollars.41
-Azurix prevents ABA from exercising its rights under the Concession
Agreement before local courts and brings a claim before an arbitration
tribunal to its own benefit and by doing so is ignoring the rights of ABA’s
other shareholders who, due to Azurix’s actions, are not going to have the
chance to be granted a remedy.42
-It is impossible for this Tribunal to resolve the dispute without deciding
the scope of ABA’s and the Province’s rights under the Concession
Agreement or performing regulatory functions by undertaking the task of
judicial review of the decisions of the regulatory agencies of the Province
and Argentina.43
-The proceedings initiated by Azurix and ABA before different fora
constitute an abuse of process.44
5 Additional request
46. During the hearing on jurisdiction the Respondent made an additional request that
the Tribunal consider suspending this proceeding until the Supreme Court of the Province has
decided the case before it.45
41
Argentina’s Reply on Jurisdiction, paras. 30-34.
42
Ibid., para. 35.
43
Ibid., paras. 38-39.
44
Ibid., paras. 144-145.
45
Hearing on Jurisdiction, September 9-10, 2003, Transcripts of September 10, 2003, p. 11.
25
IV. APPLICABLE LAW
47. In its Memorial, Azurix’s affirmed that, since the parties have not chosen the
applicable law to the dispute under Article 42(1) of the Convention, the law applicable to this
dispute is international law because the BIT is itself the governing law as lex specialis between
the parties and it expressly requires Argentina to comply with international law.46
According to
Argentina, under Article 42(1) of the Convention, the law applicable to the dispute is primarily
Argentine law which is the law applicable to the contractual and provincial administrative issues
underlying Azurix’s claim. In Argentina’s view, the BIT is the point of reference to establish the
merits of Argentina’s obligations regarding Azurix’s investment, and international law from
unconventional sources is relevant provided that reference to it is made in the BIT or if it is
relevant for the interpretation of the BIT or is incorporated into the law of Argentina.47
48. As pointed out by both parties, the relevant provision for determining the law
applicable to this dispute is Article 42(1) of the Convention. However, the rules applying to the
dispute under Article 42(1) address the resolution of disputes on the merits, and so will not
necessarily be those which apply to the Tribunal’s determination of its jurisdiction under Article
41 at this stage of the proceedings.48
49. Article 41 of the Convention provides that the Tribunal shall be the judge of its
own competence, and any objection by a party to the dispute that that dispute is not within the
46
Claimant’s Memorial, pp. 149-156.
47
Argentina’s Memorial on Jurisdiction, paras. 13-15.
48
See also CMS v. Argentina , paras. 88-89.
26
jurisdiction of the Centre, or for other reasons is not within the competence of the Tribunal, shall
be considered by the Tribunal. Article 41 does not state what the applicable law rules are for the
determination of the Tribunal’s competence over the dispute as opposed to those applicable to
the dispute itself.
50. The jurisdiction of the Centre is determined by Article 25 of the Convention. In
addition, the competence of the Tribunal is governed by the terms of the instrument expressing
the parties’ consent to ICSID arbitration. Therefore, the task of the Tribunal is to assess whether
the Claimant’s request for arbitration falls within the terms of said Article 25 of the Convention
and Article VII of the BIT.
V. CONSIDERATIONS
1. Preliminary Considerations
51. The Tribunal will first review the threshold conditions under the Convention and
the BIT that a claim needs to meet for purposes of the jurisdiction of the Centre and the
competence of the Tribunal, whether or not said conditions have been subject of controversy
between the parties.
52. For this purpose, it is useful to recall the key provisions, Article 25 of the
Convention and Article VII of the BIT, on which the jurisdiction of the Centre and the
competence of this Tribunal rest. Article 25 provides:
(1) “The jurisdiction of the Centre shall extend to any legal dispute arising
directly out of an investment, between a Contracting State (or any
constituent subdivision or agency of a Contracting State designated to the
Centre by that State) and a national of another Contracting State, which
the parties to the dispute consent in writing to submit to the Centre. When
27
the parties have given their consent, no party may withdraw its consent
unilaterally.
(2) "National of another Contracting State" means:
any natural person who had the nationality of a Contracting State
other than the State party to the dispute on the date on which the
parties consented to submit such dispute to conciliation or
arbitration as well as on the date on which the request was
registered pursuant to paragraph (3) of Article 28 or paragraph (3)
of Article 36, but does not include any person who on either date
also had the nationality of the Contracting State party to the
dispute; and
any juridical person which had the nationality of a Contracting
State other than the State party to the dispute on the date on which
the parties consented to submit such dispute to conciliation or
arbitration and any juridical person which had the nationality of the
Contracting State party to the dispute on that date and which,
because of foreign control, the parties have agreed should be
treated as a national of another Contracting State for the purposes
of this Convention.
(3) Consent by a constituent subdivision or agency of a Contracting State
shall require the approval of that State unless that State notifies the Centre
that no such approval is required.
(4) Any Contracting State may, at the time of ratification, acceptance or
approval of this Convention or at any time thereafter, notify the Centre of
the class or classes of disputes which it would or would not consider
submitting to the jurisdiction of the Centre. The Secretary-General shall
forthwith transmit such notification to all Contracting States. Such
notification shall not constitute the consent required by paragraph (1).”
Article VII of the BIT reads as follows:
1. “For purposes of this Article, an investment dispute is a dispute between a
Party and a national or company of the other Party arising out of or
relating to (a) an investment agreement between that Party and such
national or company; (b) an investment authorization granted by that
Party's foreign investment authority (if any such authorization exists) to
such national or company; or (c) an alleged breach of any right conferred
or created by this Treaty with respect to an investment.
28
2. In the event of an investment dispute, the parties to the dispute should
initially seek a resolution through consultation and negotiation. If the
dispute cannot be settled amicably, the national or company concerned
may choose to submit the dispute for resolution:
(a) to the courts or administrative tribunals of the Party that is a party to
the dispute; or
(b) in accordance with any applicable, previously agreed disputesettlement
procedure; or
(c) in accordance with the terms of paragraph 3.
3. (a) Provided that the national or company concerned has not submitted the
dispute for resolution under paragraph 2 (a) or (b) and that six months
have elapsed from the date on which the dispute arose, the national or
company concerned may choose to consent in writing to the submission of
the dispute for settlement by binding arbitration:
(i) to the International Centre for the Settlement of Investment
Disputes ("Centre") established by the Convention on the
Settlement of Investment Disputes between States and
Nationals of other States, done at Washington, March 18,
1965 ("ICSID Convention"), provided that the Party is a
party to such convention …”
53. It will also be helpful to reproduce here the definition of “investment” agreed in
the BIT. The term “investment” is defined in Article I.1(a) as meaning:
“every kind of investment in the territory of one Party owned or
controlled directly or indirectly by nationals or companies of the
other Party, such as equity, debt, and service and investment
contracts; and includes without limitation:
(i) tangible and intangible property, including rights, such
as mortgages, liens and pledges;
(ii) a company or shares of stock or other interests in a
company or interests in the assets thereof;
(iii) a claim to money or a claim to performance having
economic value and directly related to an investment;
(iv) intellectual property …; and
29
(v) any right conferred by law or contract, and any licenses
and permits pursuant to law.”
54. Before considering the specific objections to jurisdiction, the Tribunal will first
address whether an attempt was made to reach an amicable settlement of the dispute within the
first six months after it arose as required by Article VII(3) of the BIT, and then will consider the
requirements of consent to ICSID jurisdiction: “national of another Contracting Party”, “legal
dispute”, and “dispute arising directly out of an investment”.
a) Attempt at amicable settlement
55. Under paragraphs 2 and 3 of Article VII of the BIT the parties to the dispute
should initially seek a resolution through consultation and negotiation and the national or
company concerned may have recourse to arbitration only after six months from the date that the
dispute arose. The Claimant delivered notice of the existence of an investment dispute under the
BIT to the President of the Argentine Republic on January 11, 2001.49
According to the
Arbitration Request, dated September 19, 2001, Azurix pleaded repeatedly for assistance from
the Respondent.50
The Argentine Republic responded on September 5, 2001 disclaiming the
existence of an investment dispute or attribution of responsibility for the acts of the Province.51
The Tribunal is satisfied that the Claimant attempted to resolve the dispute through consultation
or negotiation and failed.
49
Exhibit 178 to the Arbitration Request.
50
Ibid. Exhibits 179 and 180.
51
Ibid. Exhibit 182.
30
b) Consent by the parties to the jurisdiction of ICSID
56. Article VII.4(a) of the BIT embodies the consent of the parties to the BIT - the US
and Argentina - to the submission of any investment dispute to binding arbitration in accordance
with the choice of the national or company in question, and further provides that such consent
satisfies the requirement for written consent for purposes of Chapter II of the Convention.
Argentina signed the Convention on May 21, 1991, and the ICSID Convention came into force
in respect of Argentina on November 18, 1994. The open invitation provided by the parties to
the BIT to investors to settle their claims, inter alia, through arbitration, has been taken up by the
Claimant by its letter, dated July 12, 2001,52
to the Respondent and the Secretary General of the
Centre consenting to ICSID jurisdiction. Furthermore, the filing of the request for arbitration is
by itself sufficient evidence of the Claimant’s consent. Therefore, the Tribunal is satisfied that
both parties to the dispute have consented to ICSID jurisdiction.
c) National of another Contracting Party
57. The Claimant is a company incorporated in the United States of America (the
Convention came into force in respect of the United States of America on October 14, 1966). As
already noted, the Respondent, Argentina, is a Contracting Party. The Tribunal is satisfied with
the evidence presented by the Claimant establishing its nationality and that, as required by the
BIT, it is not controlled by nationals of third parties.
52
Ibid. Exhibit 181.
31
d) Legal dispute
58. The dispute as raised by the Claimant - an alleged breach by Argentina of
obligations owed by it to Azurix under the BIT - is a legal dispute which, in the words of the
Report of the Executive Directors of the World Bank on the Convention, concerns “the existence
or scope of a legal right or obligation, or the nature or extent of the reparation to be made for
breach of a legal obligation, and is more than a mere ‘conflict of interest.’”
e) Dispute arising directly out of an investment
59. What constitutes Azurix’s “investment” has been a matter of controversy between
the parties. For the Claimant, the dispute arises directly from an investment made in Argentina
consisting of “Azurix’s payment of its US$438.6 million canon (which constitutes invested
capital), its ownership interest and investment in ABA, and the rights in the Concession
Agreement, all of which are investments under the BIT and the ICSID Convention.”53
On the
other hand, the Respondent claims that the dispute is a contractual dispute related to the
Concession Agreement. According to the Respondent, “The Concession Agreement is neither
and[sic] investment agreement, an agreement for economic development, nor an international
contract.”54
Furthermore, only the Province may be party to such contractual dispute since “the
Argentine Republic is not a party to such a Concession Agreement, neither has it guaranteed in
any way whatsoever the fulfillment of the contractual obligations of the Province. The
Argentine Republic is a federal state and the Province has broad powers to assume the
53
Azurix’s Rejoinder on Jurisdiction, para. 6(ii).
54
Argentina’s Memorial on Jurisdiction, para. 11.
32
obligations it assumed under the Concession Agreement.”55
Therefore, the Tribunal needs to
consider whether the investment as defined by the Claimant qualifies as an investment for
purposes of the BIT and whether the dispute between the parties to these proceedings is directly
related to it.
60. The Respondent admits that “The definition of investment in the Treaty allows a
local company to qualify as an investment and that such company be a party to an ICSID arbitral
procedure”56
. The Respondent also considers that “it is clear that the local companies that
AZURIX used to take part in the bidding process, and even ABA - the company that signed the
Concession Contract - qualify as investment according to the Treaty and could be party to an
ICSID procedure.”57
However, the Respondent finds that the Claimant has failed to clarify this
issue and concludes that, as defined by AZURIX in the Counter-Memorial on Jurisdiction,
“AZURIX considers that its investment consists of i) 90% of the ABA shares and ii) the rights
provided for in the Concession Contract. AZURIX does not allege that ABA qualifies as an
investment pursuant to the Treaty definitions. Nor is ABA part of the present arbitration
procedure.”58
61. The Respondent also maintains that, according to the BIT, “the rights arising from
the Concession Contract qualify as an investment of AZURIX if they are… rights on some
55
Ibid., para. 12.
56
Argentina’s Reply on Jurisdiction, heading II.b). (Emphasis in the original).
57
Ibid., para. 9. (Emphasis in the original).
58
Ibid., para. 11. (Emphasis in the original).
33
operation that has economic value and that is directly related to an investment”59
. In this case,
the requirement is met only if ABA is an investment. To qualify as an investment, the rights
conferred by law or contract are “an investment to the extent that they are held by a company that
qualifies as an investor (national or company of one of the contracting parties) - which does not
occur in this case -, or that they are under the direct or indirect control of an investor. But with
respect to the latter – what does, indeed, occur in the present case -, the local company has to be
controlled by the investor and hence to be an investment”. As a result, since Azurix alleges that
ABA and the other subsidiaries are not an investment, then the contractual rights under the
Concession are not an investment protected under the BIT.60
62. The Tribunal finds difficulty in following the Respondent’s reasoning on the basis
of the definition of investment in Article I.1(a) of the BIT. First, a concession contract, such as
that entered by ABA with the Province, qualifies as an investment for purposes of the BIT given
the wide meaning conferred upon this term in the BIT that includes “any right conferred by law
or contract”.61
The Concession Agreement itself refers repeatedly to investments. For instance,
in the context of the determination of the tariff level, the Concession Agreement refers to “a
59
Ibid., para.12. (Emphasis in the original).
60
Ibid., paras. 13 and 14. (Emphasis in the original).
61
Article I.1.(a)(v).
34
reasonable return on the amounts invested by the Concessionaire”62
, and “the Concessionaire
does hereby undertake to make all necessary investments to execute…”63
63. Second, the Respondent bases in part its argument on sub-paragraph (iii) of the
definition which requires a claim to money or a claim to performance to have economic value
and to be “directly related to an investment”64
. The definition of investment lists a “company”,
“shares of stock” and, in a separate category, “any right conferred by law or contract”. A
company, shares held in a company or rights under a contract, any contract, qualify as an
investment. Provided the direct or indirect ownership or control is established, rights under a
contract held by a local company constitute an investment protected by the BIT. The definition
in Article I.1(a) simply lists examples of what an investment is, the list is not exhaustive and
each item is independent from each other. The only condition is that, whatever the form an
investment may take, it must be directly or indirectly owned or controlled by nationals or
companies of the other party to the BIT65
.
64. Azurix made an investment by paying a “canon” to obtain the concession to
provide water and wastewater services to the Province.66
To carry out the investment, Azurix
62
Clause 12.1.1 of the Concession Agreement. (Emphasis added).
63
Ibid., Clause 7.8. (Emphasis added).
64
Argentina’s Reply on jurisdiction, para. 12. (Emphasis in the original).
65
The purpose of the definition as explained by the drafter is, inter alia, not to distinguish “between investment
owned or controlled directly and that owned or controlled through corporate tiers” and to ensure that “local
subsidiaries per se are covered investment. Further, the company need not be wholly owned by the investor. Any
ownership or other interest in a company would be considered investment.” Kenneth J. Vandevelde, United States
Investment Treaties. Policy and Practice (1992) pp. 45-46.
66
Azurix’s Memorial at 1.
35
organized several subsidiaries, as required by the Bidding Terms, and established a locally
registered company in Argentina, ABA. The objective of the definition of investment in the BIT
is precisely to include this type of structure established for the exclusive purpose of the
investment in order to protect the real party in interest. In commenting on the reference to
foreign control in Article 25(2)(b) of the Convention, the tribunal in CMS Gas Transmission
Company v. Argentina (hereinafter CMS)67
stated that “foreign control in terms of treating a
company of the nationality of the Contracting State party as a national of another Contracting
State is precisely meant to facilitate agreement between the parties, so as not to have the
corporate personality interfering with the protection of the real interests associated with the
investment”68
.
65. The Tribunal is satisfied that the investment described by Claimant in its
Rejoinder on Jurisdiction is an investment protected under the terms of the BIT and the
Convention: (a) Azurix indirectly owns 90% of the shareholding in ABA, (b) Azurix indirectly
controls ABA, and (c) ABA is party to the Concession Agreement and was established for the
specific purpose of signing the Concession Agreement as required by the Bidding Terms.
66. Having determined that the Claimant’s investment is an investment protected by
the BIT, the Tribunal concludes that the dispute as presented by the Claimant is a dispute arising
directly from that investment.
67
CMS Gas Transmission Company v. Argentine Republic, (ICSID Case No. ARB/01/8). Decision of the Tribunal
on Objections to Jurisdiction of July 17, 2003, 42 ILM 800.
68
Ibid, para. 51. (Emphasis added).
36
2. Ius standi
67. The Respondent introduced a new objection to the jurisdiction of the Tribunal in
its Reply on Jurisdiction alleging that Azurix has no standing to assert rights that arise from the
Concession. According to the Respondent, only ABA could assert these rights and ABA is not a
party to these proceedings. The Claimant has requested the Tribunal to reject this objection on
the basis that it is untimely and has been waived pursuant to Arbitration Rule 41(1). The
Respondent, during the hearing on jurisdiction, justified the timing of the objection on the basis
of the allegations made by the Claimant in its Counter-memorial on Jurisdiction. Only then did
it become evident that the Claimant was trying to avoid by all means the commitments assumed
by itself and the companies controlled by it while at the same time availing itself of the rights of
the local companies.69
68. While the Tribunal agrees that the objection has been filed out of time, it
considers that the issues it raises are such that they should be considered upon at the Tribunal’s
own initiative under Arbitration Rule 41(2)70
. The Tribunal is assisted in its consideration by the
fact that this point has been fully argued by the parties since the Claimant responded “out of an
abundance of caution.”71
69
Argentina’s Reply on Jurisdiction, paras. 3 and 146.
70
Arbitration Rule 41(2) provides: “The Tribunal may on its own initiative consider, at any stage of the proceeding,
whether the dispute or any ancillary claim before it is within the jurisdiction of the Centre and within its own
competence.”
71
Azurix’s Rejoinder on Jurisdiction, para. 21.
37
69. According to the Respondent, “If the treaty allows the judicial penetration of the
local entity in order to attribute the rights of said entity to the controlling shareholder, the
obligations undertaken must be then assigned on the same basis.”72
The Respondent has no
doubt that an investor in shares has standing to activate dispute settlement mechanisms under
BITs in “cases of acts by the host state that affect it directly”73
but, because the shareholders and
the corporation have distinct legal personality, “it is a different situation when a shareholder
brings a claim related to assets or situations concerning the company it has shares in… The issue
is not related either to the investor qualification of the claimant, nor to the investment
qualification of the shares, but to claimant’s standing or ius standi in respect of certain
situations.”74
70. The Respondent bases its argument primarily on the decision of the International
Court of Justice (hereinafter “ICJ”) in Barcelona Traction Light and Power Company Limited
(Belgium v. Spain) (hereinafter Barcelona Traction)75
which it considers a statement of
customary international law on this matter. The Respondent admits that BITs include clauses
that extend the scope of operation of the treaty to create an exception of conventional nature
which overcomes “the lack of ius standi of the shareholders to file indirect claims.”76
When “the
72
Argentina’s Reply on Jurisdiction, para. 146.
73
Ibid., para. 148.
74
Ibid., para. 149.
75
Barcelona Traction, Light and Power Company, Limited (New Application, 1962), Judgment 5 February 1970
(Reports 1970, p. 3).
76
Argentina’s Reply on Jurisdiction, para. 153.
38
local company controlled by the investor also qualifies as investor, the ius standi obstacle for
indirect claims is surpassed with the possibility that [sic] local company be the one to allege the
existence of an infringement of the Treaty. In these cases, investment treaties allow to turn an
indirect claim into a direct one.”77
71. The Claimant has pointed out that the decision in Barcelona Traction has been
widely criticized as being an incorrect statement of customary international law and that the
ICJ’s decision did not examine whether international law provided an independent source of
rights and protections of shareholders but only whether a State could protect its shareholders in a
foreign corporation affected by measures of a third State.78
The ICJ considered it likely that the
State of the shareholders has a right of diplomatic protection when the State whose responsibility
is invoked is the national State of the company. The ICJ also noted developments of investor
protection through treaty stipulations whereby companies are themselves vested with a direct
right to defend their interests against States. More recently, in Elettronica Sicula SpA (ELSI)
(United States of America v. Italy),79
the ICJ accepted the protection of foreign shareholders by
the State of their nationality against the State of incorporation. The jurisdiction of the ICJ in this
case was based on the Treaty of Friendship, Commerce and Navigation between the United
States of America and Italy, a category of treaties which are the direct precursor of BITs.
77
Ibid., para. 152.
78
Azurix’s Rejoinder on Jurisdiction, paras. 24-27.
79
Elettronica Sicula S.p.A. (ELSI), Judgment 20 July 1989 (Reports 1989, p. 15).
39
72. The issues before this Tribunal concern not diplomatic protection under
customary international law but the rights of investors, including shareholders, as determined by
treaty, namely, under the BIT. The Tribunal does not find it necessary to resolve the controversy
regarding the extent of the right of a State under public international law to protect its nationals
who are shareholders in foreign companies.
73. The Tribunal has already found that given the wide meaning of investment in the
definition in Article I.1(a), the provisions of the BIT protect indirect claims. This conclusion,
based on an analysis of the text of the provision, concurs with decisions of tribunals that have
interpreted the same provision in the same BIT or similar provisions in other BITs to which
Respondent is a party and that have been referred to by the parties in their pleadings. Thus in
CMS the tribunal concluded that “jurisdiction can be established under the terms of the specific
provision of the BIT. Whether the protected investor is in addition a party to a concession
agreement or a license agreement with the host State is immaterial for the purpose of finding
jurisdiction under those treaty provisions, since there is a direct right of action of
shareholders”.80
74. We conclude the discussion on ius standi by affirming the ius standi of Azurix in
these proceedings: Azurix is the investor that made the investment through indirectly owned and
controlled subsidiaries. Whether this conclusion binds Azurix to the commitments made by its
80
Ibid., para. 65. (Emphasis added).
40
subsidiaries, as argued by the Respondent, is the subject of the consideration of the first
objection to jurisdiction – to which we now turn.
3. First objection to jurisdiction - agreement to the jurisdiction of the courts of La
Plata and waiver of all other fora
75. The Respondent bases this objection on the nature of the dispute and the scope of
commitments made by the Claimant under the provisions of the Bidding Terms, the Concession
Agreement, the Commitment Letters and the Clarifying Circular 11(A).
76. According to the Respondent, the dispute is of a contractual nature and related to
the interpretation of and performance under the Concession Agreement. However, for purposes
of determining its jurisdiction, the Tribunal should consider whether the dispute, as it has been
presented by the Claimant, is prima facie a dispute arising under the BIT. The investment
dispute which the Claimant has put before this Tribunal invokes obligations owed by the
Respondent to Claimant under the BIT and it is based on a different cause of action from a claim
under the Contract Documents. Even if the dispute as presented by the Claimant may involve
the interpretation or analysis of facts related to performance under the Concession Agreement,
the Tribunal considers that, to the extent that such issues are relevant to a breach of the
obligations of the Respondent under the BIT, they cannot per se transform the dispute under the
BIT into a contractual dispute. This follows from the scope of the jurisdiction clauses in the
Contract Documents and the identity of the parties to whom the commitments were made.
77. The scope of the jurisdiction and waiver of any other forum clauses, whether
included in the Bidding Terms, the Concession Agreement or the Commitment Letters, indicates
that such clauses relate to disputes under the terms of the document concerned and between the
41
parties to that particular document. Understandably, the Respondent is consistent with its
conception of the dispute as a contractual dispute when it maintains that these clauses exclude
claims against itself. However, Azurix has not filed with this Tribunal a claim against any of the
parties to the Contract Documents but against the Respondent. The Respondent itself has stated
repeatedly in this proceeding that it is not party to any of the Contract Documents.
78. The Respondent argues that the existence of the waiver in addition to the forum
selection clause distinguishes this case from other ICSID cases where tribunals have held that a
forum selection clause in the Contract Documents underlying the investment referring to the
domestic courts of the State party does not preclude the jurisdiction of an ICSID tribunal. In
particular, the Respondent has pointed out that said provision was added to the Contract
Documents in light of the decisions in Lanco and Vivendi I precisely to avoid the situation in
which the Respondent finds itself now.81
79. The tribunals in the cases cited concluded that such forum selection clauses did
not exclude their jurisdiction because the subject-matter of any proceedings before the domestic
courts under the contractual arrangements in question and the dispute before the ICSID tribunal
was different and therefore the forum selection clauses did not apply. This reasoning applies
equally to the waiver of jurisdiction clause in this case. The claims or causes of action before
this Tribunal are different in nature from any claims which ABA could bring before the courts of
the city of La Plata under the Contract Documents.
81
Hearing on Jurisdiction, September 9-10, 2003, Transcripts of September 9, 2003, p. 18 and ff.
42
80. As already noted, the Respondent has indicated that the specific waiver words in
the clause were included precisely to avoid that claims under the Contract Documents would be
brought to the venues for settlement provided under the BIT. The Tribunal finds that the
addition of the waiver has not made a substantive difference to the exclusive forum clause
included in the concessions agreements considered by ICSID tribunals in Lanco or Vivendi I,
since the acceptance of the exclusivity of a forum implies by definition the renunciation of any
other fora whether or not explicitly stated in the clause.
81. The Claimant has contended that the waiver, as understood by the Respondent,
would mean that the Claimant would be deprived of recourse since the courts of La Plata would
not be competent to consider claims against the Respondent. The Respondent considers this not
to be the case: “the Argentine Republic has not alleged that AZURIX had waived the ICSID
jurisdiction, but it has alleged that it [Azurix] had waived the right to put forward controversies
in terms of investments related to the interpretation and performance before the forums set forth
under the Treaty” and “AZURIX aims to create the impression that the non-availability of the
ICSID jurisdiction implies bringing plaintiff to a deadlock for the defense of its rights. That is
not correct. ABA, and therefore AZURIX, have useful [sic] and expressly agreed upon remedies
to its disposal in order to enforce the same rights relative to the Concession Contract as those
claimed in this proceeding.”82
The point is that the rights under the Concession Agreement and
under the BIT are not the same and that the generality of the waiver would exclude even the
82
Argentina’s Reply on Jurisdiction, paras. 105 and 108, respectively.
43
courts at the federal level which would normally be competent to consider claims against the
Respondent.
82. The scope of the waiver has also been discussed by the parties in the context of
the Clarifying Circular 11(A). The Respondent attributes to this Circular great significance in
terms of explaining to the prospective bidders for the concession that they were waiving their
rights to arbitration under the BIT. While this was the question that the Privatization
Commission was asked, its response seems to have avoided the answer and, in fact, repeated the
terms of the clause to be clarified rather than clarifying it. At best, the Commission’s reply is
ambiguous.
83. The validity of the waiver under international law has also been a matter of
extensive discussion by the parties. It has been alleged by the Respondent that now that
individuals have rights recognized under international law as direct subjects of international law
they may renounce to such rights. The Respondent has urged that “the legal situation arising as a
consequence of AZURIX’s claim holds certain similarities with those issues already resolved on
the validity of the ‘Calvo clause.’”83
The Respondent argues that the criticism of this clause was
based on the fact that it implied a waiver by individuals of a right that belonged to their national
States: “Accordingly the United States has consistently maintained that the individual could not
waive a right which was not his but was the right of his state. Under the hypothesis that it is the
individual himself who has rights under international law, this basic objection loses all logical
83
Argentina’s Memorial on Jurisdiction, paras. 62 and ff.
44
force. The rights which appertain to the individual may be waived by the individual.”84
This
leads the Respondent to the conclusion that “Since investment treaties regulate and protect
merely economic interests, and considering the broad-spectrum of options available to investor
[sic] to enforce this type of rights, there can be no doubts on the possibility to waive the right to
bring investment disputes in general, or at least, before this international arbitration tribunal.”85
84. The Respondent further supports its argument by reference to the decisions of the
United States of America-Venezuela and United States of America-Mexico Claims Commissions
in Woodruff86
and North American Dredging,87
respectively. In both cases the Commissions
recognized the waiver in contracts signed by the claimant with the State. The parties disagree on
the significance of the decisions for purposes of the instant dispute. The Respondent alleges that
the decisions support the right of a private party to renounce its rights under a treaty, while the
Claimant maintains that their significance is limited to the waiver of contractual rights. Both are
correct according to whether the present dispute is a contractual dispute or a dispute between a
State and an investor under a BIT. The Commissions that decided these cases recognized that an
individual could commit himself to submit his contractual claims to the local courts, but at the
same time they differentiated these claims from the claims of their States under international law
which they, as individuals, could not have waived. An early commentator on the “Calvo clause”
84
Ibid., quote from Judge Jessup in para. 64.
85
Ibid., para. 66.
86
Woodruff v. Venezuela, RIAA, volume IX, Hague ICJ Registry, p. 213.
87
North American Dredging Company of Texas v. United Mexican States, RIAA, volume IV, Hague ICJ Registry, p.
26.
45
and North American Dredging said: “in so far as the Calvo clause demands resort to local
remedies for breach of contract, it is legitimate, but superfluous; for that rule is clearly stated and
thoroughly established in international law. In so far as the clause attempts to forbid
interposition under any circumstances, whether by a promise to that effect, or by regarding the
alien as a citizen for the purposes of the contract, or by a unilateral definition of denial of justice,
or otherwise, it is illegal and futile; for international law clearly states the right to interpose in
case of denial of justice.”88
85. The significance of the cases for this Tribunal is that the private parties could
waive access to the Commissions to settle contractual disputes with a State with which they had
contracted. In the dispute before the present Tribunal, as has been affirmed by the Respondent,
the State is not a party to any of the Contract Documents, and there was no waiver commitment
made by the Claimant in favor of Argentina. Since the Tribunal has found that the waiver does
not cover the claim of Azurix in the dispute before it, the Tribunal does not need to comment
further on the issue of renunciation by individuals of rights conferred upon them by treaty.
4. Second objection to jurisdiction – the dispute has already been submitted to the
courts of Argentina under Article VII of the BIT (“fork-in-the-road” argument)
86. Argentina bases this objection on the administrative appeals filed by ABA, and
on the fact that “all the issues relative to the dispute between the Province and ABA have been
submitted to the Court of Justice of the Province in the framework of the discussions around the
88
C. Eagleton, The Responsibility of States in International Law, New York University Press, 1928, p. 175.
46
validity of Decree No. 2598/01, by which it rescinded the Concession Agreement.”89
The
Respondent argues that the action before the Supreme Court and the claim before the Tribunal
have an identical basis and that ABA and Azurix have recognized this by requesting that the
submitted claim be “filed” due to this arbitration.90
The administrative appeals filed fall within
the scope of what the BIT defines as administrative courts. In support of its argument the
Respondent refers to the decisions on jurisdiction in Waste Management, Inc. v. United Mexican
States (hereinafter Waste Management)91
and Vivendi I. These decisions, in the Respondent’s
opinion, “consider that what matters from the viewpoint of the choice of jurisdiction established
by the bilateral investment treaties is that there should be coincidence between the basis of the
arbitration case presented under such international instruments and the claim brought before the
local alternative forum.”92
87. The Claimant considers the objection to lack merit because there is no identity of
parties between this arbitration and the cases brought by ABA before the local courts: the latter
are actions directed to protect ABA’s rights without compromising Azurix’s access to ICSID
arbitration, there is no identity of claims, and the arbitration was initiated before the first court
action was filed by ABA.93
The Claimant denies that ORAB is an administrative tribunal for
purposes of the BIT and that proceedings carried out before this entity could have marked the
89
Argentina’s Memorial on Jurisdiction, para. 80.
90
Ibid., paras. 82 and 85.
91
Waste Management, Inc. v. United Mexican States, June 2, 2000, 5 ICSID Rep. 443.
92
Argentina’s Memorial on Jurisdiction, para. 92.
93
Azurix’s Rejoinder, paras. 103 and ff.
47
commencement of the proceedings now before local courts.94
The Claimant also considers as
misplaced the reliance on Waste Management by the Respondent to assert that identity of facts is
sufficient to trigger the fork-in-the-road provision of the BIT. It notes that this is specific to
NAFTA and that “the majority of the first tribunal in Waste Management held that Article 1121,
in order to bar access to international arbitration, required merely an identity of facts without
taking into consideration whether the proceedings were based on claims arising from domestic
law or NAFTA.”95
On the other hand, the fork-in-the-road provision of the BIT “requires identity
of facts and causes of action in the local and international proceedings for the provisions to be
triggered.”96
88. In one of the first cases that an ICSID tribunal had to decide on the existence of a
pending suit and its relevance to the ICSID proceedings, the tribunal “declared that there could
only be a case of lis pendens where there was identity of the parties, object and cause of action in
the proceedings pending before both tribunals”97
.
89. This line of reasoning has been consistently followed by arbitral tribunals in cases
involving claims under BITs, unless, as noted above, the controlling agreement provided
otherwise, as in the case of NAFTA. The most recent instance involves the same BIT and
Respondent as in the present case. In CMS, the tribunal referred to decisions of several ICSID
94
Ibid., para. 119.
95
Ibid., para. 132.
96
Ibid.
97
Benvenuti and Bonfant SRL v. the Government of the People’s Republic of the Congo, 1 ICSID Rep. 340 at para.
1.14.
48
tribunals that have held that “as contractual claims are different from treaty claims, even if there
had been or there currently was a recourse to the local courts for breach of contract, this would
not have prevented submission of the treaty claims to arbitration. This Tribunal is persuaded that
with even more reason this view applies to the instant dispute, since no submission has been
made by CMS to local courts and since, even if TGN had done so –which is not the case–, this
would not result in triggering the “fork-in-the-road” provision against CMS. Both the parties
and the causes of action under separate instruments are different.”98
90. Neither of the parties is a party to the proceedings before the local courts. Even if
Azurix had joined ABA as a plaintiff in those courts, there would not be party identity since
Argentina is not party to any of those proceedings.
91. The parties have discussed extensively the jurisdictional nature of ORAB in
relation to the date when the administrative proceedings started. The significance of this date
being that, if the filings before ORAB are considered to be claims before a court for purposes of
Article VII of the BIT, then all 12 cases were filed with the administrative courts after the
request for arbitration in the instant case was submitted to ICSID.
92. Given the conclusion reached above on the differentiation of the claims and the
parties, the Tribunal does not need to consider this matter extensively; it simply records that it is
not persuaded that ORAB is equivalent to an administrative tribunal for purposes of the BIT. It
does not have the independence required of a tribunal and does not have a judicial function to
98
CMS Gas Transmission Company v. the Republic of Argentina (Case No. ARB/01/8), Decision of the Tribunal on
Objections to Jurisdiction of July 17, 2003, 42 ILM 800, para. 80.
49
settle conflicts with the concessionaire. The law under which ORAB was established
characterizes the decisions of ORAB, taken within the limits of its competence, as administrative
acts that bind the concessionaire and against which the latter may interpose administrative
remedies as permitted by the provincial law and without prejudice to its right to file a claim
before courts.99
To maintain otherwise is to admit that ORAB as a judicial organ may be party
and judge in the same dispute.
5. Alleged additional consequences
93. The Respondent has presented arguments based on the consequences that would
follow from an affirmation of jurisdiction by the Tribunal. They concern claims that (a) the
Tribunal is forum non conveniens, (b) it is impossible for the Tribunal to decide on the claims
made by Azurix without interpreting the Concession Agreement or performing regulatory
functions, (c) the Claimant has indulged in abuse of process, (d) certain adverse economic
impacts will result from the Tribunal’s exercise of jurisdiction, (e) the subsidiaries of Azurix are
its alter ego, and (f) double recovery. The Tribunal will now consider each of these alleged
consequences.
a) Forum non conveniens
94. Argentina claims that the Tribunal is forum non conveniens for the Province,
saying that a finding that it has jurisdiction could entail a denial of justice to the Province
because it is not a party to the proceeding and it is also a creditor of ABA. In the same vein the
Respondent has argued that ABA’s other shareholders are not going to have the opportunity of
99
Law 11.820, Annex II, Chapter XII, Article 51.
50
being granted a remedy because of the submission of the dispute to arbitration by Azurix. The
Tribunal finds that these are not relevant factors for determining its jurisdiction. Other creditors,
including the Province, or other shareholders are not precluded from bringing claims provided
they meet the jurisdictional requirements of the forum to which they apply.
b) Determination of the scope of rights under the Concession Agreement and
performance of regulatory functions
95. As to Argentina’s claim that it is impossible for this Tribunal to resolve the
dispute without deciding the scope of ABA’s and the Province’s rights under the Concession
Agreement or performing regulatory functions by undertaking the task of judicial review of the
decisions of the regulatory agencies of the Province and Argentina, the Tribunal notes that its
role is limited to deciding whether Argentina has breached its obligations to Azurix under the
BIT. The extent to which this requires an analysis of facts which may have been put before an
Argentine court or administrative tribunal, and the extent to which those facts are relevant to the
Tribunal’s determination of merits is not for the Tribunal to judge at this stage but they are not
relevant considerations for the Tribunal to take into account in determining the jurisdiction of the
Centre and its on competence on the basis of Article 25 of the Convention and Article VII of the
BIT.
c) Abuse of process
96. Based on the reasons given in the consideration of the second objection to
jurisdiction, the Tribunal finds that there is no abuse of process by Azurix by the submission of
its claim to this forum.
51
d) Economic impact
97. The Respondent has requested that the Tribunal bear in mind certain “economic
variables” in determining its jurisdiction and assessing ABA’s and Azurix’s strategy.100
The
Respondent has listed possible adverse economic impacts of Azurix’s overall strategy, inter alia:
ABA is making itself insolvent to the detriment of its creditors such as the Province, and ABA’s
receivables in respect of its debtors and creditors, including the Province, have been pesified, yet
Azurix formulates its claims in US dollars. On the basis of the provisions that frame its
competence, the Tribunal finds that it has no grounds to include such variables in a determination
of its competence.
98. Whether these variables should be considered in the merits phase as the
Respondent has requested should the Tribunal dismiss its jurisdictional objection, is a matter, if
raised again, for decision at that time.
e) Alter ego issue
99. Argentina claims that “AZURIX participated in the Bidding procedure through
companies whose capital belonged one hundred per cent to AZURIX, they were mere
instruments and a simple alter ego of AZURIX. ABA was also a simple vehicle to express
100
Argentina’s Reply on Jurisdiction, para. 23 and ff.
52
AZURIX’s interests and will.”101
This structure is then used by Azurix to exercise contractual
rights or rights under the BIT according to its convenience.102
100. The Tribunal has already discussed the issues related to the multiple fora and the
rights that Azurix may have under the BIT as an investor through the companies that participated
in the bidding and ABA. The Tribunal needs only to note here for purposes of the alter ego
argument that the Province awarded the Concession to said subsidiaries and the Province
required that they formed a local company with whom it signed the Concession Agreement.
These undisputed facts are sufficient ground for the Tribunal to dismiss the alter ego argument.
f) Double recovery
101. In the course of its submissions Argentina has indicated its concern that Azurix
should not be able to recover twice, through proceedings before this Tribunal and via ABA
through proceedings before the local courts. The Tribunal appreciates Argentina’s concern, and
notes that any compensation awarded must be based on the actual loss a claimant is able to show.
However, the question before the Tribunal at this stage is whether it has jurisdiction; whether the
Claimant can prove loss is a matter to be considered as part of the merits.
VI. DECISION
102. Having carefully considered the parties’ arguments in their written pleadings and
oral submissions, and for the reasons stated above, the Tribunal:
101
Ibid., para. 16.
102
Ibid., Heading, para. 19 and ff.
53
1. Finds that:
(a) Azurix has shown that, prima facie, it has a claim against Argentina for
breach of obligations owed by Argentina to Azurix under the BIT.
(b) Azurix has ius standi to bring this claim, and
(c) the present dispute is within the jurisdiction of the Centre and the
competence of the Tribunal.
2. Rejects the request of the Respondent to suspend the proceeding.
103. The Tribunal has, accordingly, made the necessary Order under Arbitration Rule
41(4) for the continuation of the procedure.
104. Each party has requested that the costs of the jurisdictional phase of the
proceedings, including its own costs, be borne by the other. The Tribunal further decides to
consider this matter as part of the merits.
Done in English and Spanish, both versions being equally authoritative.
Dr. Andrés Rigo Sureda
President of the Tribunal
Sir Elihu Lauterpacht, C.B.E. Q.C.
Arbitrator
Dr. Daniel H. Martins
Arbitrator
54