By Damon Vis-Dunbar
14 October 2008
A three-person committee formed by the International Centre for the Settlement of Investment Disputes (ICSID) has rejected the Argentine government’s position that foreign investors who have been awarded damages through the ICSID arbitration system must go to an Argentine court in order to obtain enforcement of the award.
The committee has given the Argentine government 60 days as of 7 October 2008 “to reconsider its position on the extent of its obligations to pay on the final award ….”, in a decision that pushes the question of Argentina’s compliance with a string of arbitral decisions that have found the government liable to foreign investors for actions taken during its financial crisis in 2001.
The ad-hoc committee was formed in response to Argentina’s request for the annulment of an award rendered in favour of Enron Corporation, an American firm awarded damages of US$ 106 million.
Upon making its annulment request, the award was temporarily stayed. Argentina has requested that the award remain frozen until the annulment committee has made a decision. Enron, however, has asked that the stay be lifted, or that Argentina post a security, so that if the award is not annulled, Enron is guaranteed payment.
Complicating the tribunal’s decision is a fundamental disagreement between Enron and the Argentine government over the procedures for enforcing the award.
Argentina does not dispute the binding nature of the award in the case that it is not annulled. However, under its reading of the ICSID rules, “award creditors must meet the formal requirements that any person should follow in Argentina to obtain compliance with a final judgment of a local court.” In short, this position holds that Enron must, as a formality, seek compliance of the award by an Argentine court.
It’s an argument that has been firmly rejected by the ad-hoc committee. As a result, the committee has given the Argentine government 60 days to reconsider its position, before it determines whether the stay should be lifted, or if a security should be posted.
Decision on the Argentine Republic’s Request for a Continued Stay of Enforcement of the Award in Enron Corporation Ponderosa Assets, L.P. v. Argentine Republic (ICSID Case no. Arb/01/3) is available from the ICSID website by clicking here.