By Damon Vis-Dunbar
23 December 2008
Argentina has refused calls by Siemens to suspend proceedings at the International Centre for the Settlement of Investment Disputes (ICSID) in which a committee is considering Argentina’s request to revise a 2007 award, following the admission that the firm’s Argentinean subsidiary paid government officials in order to obtain a lucrative contract.
On 15 December 2008, Siemens AG, a German corporation, acknowledged that its employees paid government officials in several countries in order to win contracts, and fudged internal records to hide the payments. In a deal struck with U.S. and German authorities, Siemens will pay US$1.36 billion in penalties.
Among the confessions was that Siemens’ Argentinean subsidiary colluded with government officials in order to obtain a contract for a US$1 billion national identity card project.
When that contract was cancelled in 2001, Siemens responded by filing a claim for violations of the German-Argentina bilateral investment treaty. Some six years later, the tribunal awarded Siemens US$217 million in damages.
Argentina is attempting to have the award revised, and will no doubt use the Siemens’ confession to bolster its argument that the award should not stand.
Argentina had raised the issue of corruption during the arbitration proceedings, although an effort to submit evidence on the matter was rejected by the tribunal, on the grounds that Argentina had waited too long to do so. However, since the 2007 award various investigations and court proceedings in the United States and Germany brought strength to the corruption allegations. In the summer of 2008, a Siemens official admitted in a German court to paying illegal fees in Argentina. Based on this new evidence, Argentina submitted a request to ICSID for a revision of the award, pointing to several investment treaty cases in which tribunals have declined jurisdiction on the grounds that the investment was not made in accordance with domestic laws.
Under ICSID rules, a party can request a revision to an award “on the ground of discovery of some fact of such a nature as decisively to affect the award, provided that when the award was rendered that fact was unknown to the Tribunal and to the applicant and that the applicant’s ignorance of that fact was not due to negligence.”
Following its admission on 15 December 2008, Siemens wrote to the ICSID committee hearing Argentina’s request for a revision to the 2007 award, asking for a three-month suspension of the proceedings. However, Argentina has declined this invitation, telling the committee that it wishes to see proceedings continue without delay.