Tribunal largely adopts independent expert’s damages findings in USD 405 million award to previous owners of an Argentine public utility company

Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17; and AWG Group Ltd. v. The Argentine Republic, UNCITRAL

In a combined ICSID and UNCITRAL decision dated April 9, 2015, a unanimous tribunal awarded claimants Suez, Sociedad General de Aguas de Barcelona S.A. (AGBAR), Vivendi Universal S.A. (Vivendi), and AWG Group Ltd (AWG) a total of USD 405 million for Argentina’s breach of its fair and equitable treatment (FET) obligation during the 2001 financial crisis.

Background and claims

The claimants owned and managed the Argentine company Aguas Argentinas S.A. (AASA), which had a 30-year concession contract with the Argentine government to provide public water and sewage services. In its 2010 Decision on Liability, the tribunal found that Argentina’s emergency measures during its 2001 financial crisis led to the failure of AASA, but postponed the complex valuation of the losses sustained by the claimants.

The claimants initially alleged losses exceeding USD 1 billion, seeking damages relating to debt payments they made to multilateral lenders, loss of equity interests in AASA, unpaid management fees, and unpaid dividend interests. In turn, Argentina argued the claimants sustained zero losses because AASA was going to fail for other reasons unconnected to Argentina’s actions.

Double recovery dismissed by tribunal

Argentina also argued that there was a risk of double recovery, because AASA had a claim of ARS 2,487,600,000 (roughly USD 260 million) before Argentine courts. The tribunal determined that no actual double recovery had been established given that the Argentine court had not granted any recovery to AASA as of the date of the award.

International law standard of compensation: full compensation

Based on the three bilateral investment treaties (BITs) applicable in this case (the France–Argentina BIT, the Argentina–Spain BIT, and the Argentina–United Kingdom BIT), the tribunal determined that the legal standard of awarding compensation for Argentina’s treaty violation was to be found in international law principles. Because the parties disagreed on what international law principles should be applied, the tribunal determined that it must look to customary international law.

The tribunal reasoned that Argentina’s failure to accord claimants FET under the relevant treaties constituted international wrongful acts. As a result, Argentina was obligated to compensate the claimants for any injuries sustained from its failure to meet its international obligations and “place the Claimants ‘in the situation which would, in all probability, have existed’ if Argentina had not committed its illegal acts” (para. 27). The tribunal looked to the Chorzów Factory Case to determine that full compensation (restitution in integrum) was the appropriate customary international law standard.

Damages valuated by independent financial expert

After having received input from both parties, the tribunal appointed independent financial expert Akash Deep to valuate the damages. Each party was allowed to submit comments on Deep’s preliminary report to the tribunal. During a later hearing, parties were allowed to examine Deep and have financial experts testify on their behalf.

To determine the value of the investment, the tribunal asked Dr. Deep to first determine its value without the measures taken by Argentina, and then calculate its value with the measures taken by Argentina, and finally subtract the second value from the first and actualize that amount with an appropriate interest rate to put the claimants in the position they would have been had Argentina not breached its FET obligation. Dr. Deep created an economic model of AASA’s operation that took into consideration various factors, including general economic conditions, labour conditions, operating costs, and changes in technology that would have impacted the profitability of AASA’s concession.

The tribunal acknowledged that the valuation of claimants’ losses would be imprecise, but stated that international law does not require that damages be calculated with absolute certainty. The damages calculation need only put the claimant in the position they “in all probability” (para. 30) would have been in had Argentina not breached its obligations.

Valuation period: from date of breach until expiration date of the concession contract

Argentina argued that the valuation period should only run from 2002 (when the violation occurred) until 2006 (when the concession was terminated). However, the tribunal agreed with the claimants and Dr. Deep that the valuation period should extend to 2023, the date of the concession’s expiration according to the contract; otherwise, the shorter valuation period would “seriously undervalue” claimants’ losses.

Compensation for amounts paid to extinguish debt guarantees

The four claimants were awarded compensation of USD 360,987,923 for the amounts they paid to multilateral lenders to extinguish the debt guarantees, including compound interest. The tribunal reasoned that compound interest was more effective than simple interest in putting claimants back in the position they “currently would have been had the injury not taken place” (para. 65). It also cited to recent international tribunals who have applied compound interest for damage calculations and standard financial and business practices that apply compound interests when calculating losses.

The tribunal also dismissed Argentina’s argument that the claimants should have borne the risk of their choice to finance AASA with Dollar-denominated loans rather than Peso-denominated loans. Instead the tribunal reasoned that the fact that an investment presents a risk does not mean that it is not protected by a relevant treaty or applicable customary international law. The tribunal also awarded claimants USD 10.4 million for unpaid fines incurred by AASA.

Compensation for management fees

Claimant Suez was awarded USD 26,084,421 in unpaid management fees under its management contract with AASA for the years 2018 to 2023; Dr. Deep determined that in this period the claimant would have had sufficient cash flow to pay management fees if Argentina had afforded AASA fair and equitable treatment. Argentina opposed awarding management fees because it considered them to result from a commercial agreement, not consisting in an investment covered under the relevant BIT; thus, according to Argentina, claims arising under the contract were not within the jurisdiction of the tribunal. The tribunal determined that the management contract was not an ordinary commercial agreement given that the concession agreement required that “at least one substantial investor serve as the Concession’s operator” (para. 75).

However, the tribunal declined to award Suez earned but unpaid management fees for the years before 2001, when Argentina enacted its emergency measures. According to the tribunal, the Argentine government was not responsible for the non-payment of such management fees, and a reasonable regulator facing difficult circumstances during a financial crisis would not have provided for their payment.

Compensation for loss on equity in AASA

The claimants were awarded USD 17,466,706 for their loss on equity in AASA as determined by Dr. Deep, who averaged the results of two valuation methods: the Adjusted Present Value Method and the Flow to Equity Method. The tribunal did not award claimants the value of unpaid dividends because it considered them to be included in the value of the shareholders’ equity in AASA.


Costs in the UNCITRAL and ICSID cases were decided separately.

Under UNCITRAL Arbitration Rules, costs are normally borne by the unsuccessful party, but the tribunal has discretion to consider specific factors of the case when apportioning costs. As the present case involved “many novel and complex issues of fact and law” (para. 113), the claimants only prevailed on one violation claimed (FET), and claimants recovered far less than they claimed, the tribunal decided that it was appropriate to depart from the general principle of the unsuccessful party paying costs. It ordered claimant AWG and Argentina to each bear their own costs and to split the costs of arbitration.

Under the ICSID case, claimants Suez, Vivendi, and AGBAR as well as respondent Argentina were also directed to bear their own costs and split the costs of arbitration for the above reasons.

The claimants committed not to seek double recovery for any loss awarded and paid in the present arbitration.

Notes: The tribunal was composed of Jeswald W. Salacuse (President appointed by ICSID, U.S. national), Gabrielle Kaufmann-Kohler (claimant’s appointee, Swiss national), and Pedro Nikken (respondent’s appointee, Venezuelan national). The award is available at The 2010 Decision on Liability is available at

Marquita Davis is a Geneva International Fellow from University of Michigan Law and an extern with IISD’s Investment for Sustainable Development Program.