{"id":213,"date":"2009-01-09T07:53:00","date_gmt":"2009-01-09T12:53:00","guid":{"rendered":"http:\/\/itn.mattrock.ca\/2009\/01\/09\/tribunal-pierces-the-corporate-veil-in-jurisdictional-decision-involving-argentina\/"},"modified":"2013-02-05T10:23:43","modified_gmt":"2013-02-05T16:23:43","slug":"tribunal-pierces-the-corporate-veil-in-jurisdictional-decision-involving-argentina","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2009\/01\/09\/tribunal-pierces-the-corporate-veil-in-jurisdictional-decision-involving-argentina\/","title":{"rendered":"Tribunal pierces the corporate veil in jurisdictional decision involving Argentina"},"content":{"rendered":"

By Damon Vis-Dunbar
\n9 January 2009
\n<\/strong>
\nTwo out of three members of an ICSID<\/span> tribunal have declined jurisdiction in a claim brought by TSA Spectrum de Argentina S.A. (TSA) against the Argentine Republic under the Netherlands-Argentina bilateral investment treaty, having determined that TSA is not covered by the treaty because it is owned by an Argentine citizen.<\/p>\n

TSA, an Argentine company that took over Argentina\u2019s newly privatized radio spectrum, is a subsidiary of TSI Spectrum International N.V., a corporation registered in the Netherlands. However, after unraveling the complicated corporate structure that lay behind TSA, the tribunal determined that it was owned by an Argentine citizen, Mr. Jorge Justo Neuss.<\/p>\n

It is not unusual for investments to be routed through a third country, in order to benefit from preferential tax regimes, not to mention the extensive BIT<\/span> portfolios of countries\u2019 like the Netherlands.\u00a0 Nonetheless, the question facing the tribunal was whether TSA could access the Argentina-Netherlands BIT by virtue of its affiliation with the Dutch incorporated TSI, or whether the tribunal was compelled to peel back the corporate layers until they arrived at the final owner.<\/p>\n

In coming to a decision, the tribunal wrestled with the intent of the Article 25(2)(b) of the ICSID Convention<\/span>, which sets out the Centre\u2019s jurisdictional domain. The article provides two categories of \u201cnationals of another Contracting State\u201d: those that hold foreign citizenship, or company\u2019s under foreign control. Given that TSA did not qualify for the first category\u2014it is a Argentine company owned by an Argentine national\u00ac\u2014the question was whether it met the criteria for the second, i.e., was it a foreign controlled enterprise.<\/p>\n

Split tribunal pierces the corporate veil <\/em><\/p>\n

The award and dissenting opinion are notable for their conflicting views on whether ICSID tribunals are compelled to \u2018pierce the corporate veil\u2019 in an effort to determine who, ultimately, controls the investment under dispute.<\/p>\n

Two members of the three person tribunal, Judge Hans Danelius and Professor Georges Abi-Saab, sided in favour of \u201cpiercing the veil and going for the real control and nationality of the controllers.\u201d Indeed, given that ICSID is intended to settle disputes between foreign investors and host states, the two arbitrators argued that this approach was particularly important \u201cwhen ultimate control is alleged to be in the hands of nationals of the host State, whose formal nationality is also that of the Claimant corporation.\u201d<\/p>\n

In his dissenting opinion, Grant D. Aldonas rejected the notion that either the ICSID Convention or the Argentina-Netherlands BIT moved the tribunal to look beyond where TSA\u2019s parent company was incorporated. \u201cTo do so would substitute our judgment for that of the two sovereign states …,\u201d wrote Aldonas, who argued that the BIT was clear in its wording that it protected companies lawfully incorporated in the Netherlands, regardless of the nationality of the owner.<\/p>\n

While the majority decision on TSA\u2019s foreign control settled the question of the tribunal\u2019s jurisdiction,\u00a0 three additional objections to jurisdiction were also raised by Argentina: 1) that TSA relinquished its access to ICSID arbitration under the BIT by signing a concession contract with its own dispute settlement procedures; 2) that TSA did not respect an 18 month period in which the claimant was to seek a settlement through local administrative and judicial remedies; 3) and finally, that TSA employees engaged in corrupt activities in Argentina, and therefore the investment was not made in accordance with Argentine law.<\/p>\n

On the first, the tribunal held that the dispute resolution mechanism in the contract did not prevent the claimant from accessing arbitration under the BIT. A distinction could be drawn, said the tribunal, between claims arising out of a breach of the contract and claims arising out a breach of the BIT.<\/p>\n

On the second, the tribunal acknowledged that TSA\u2019s claim was premature, but since only three months out of the eighteen month period remained, it concluded that it would be overly formalistic to decline jurisdiction on this ground.<\/p>\n

Finally, the tribunal declined to voice an opinion on the corruption charges introduced by Argentina, given that it had already declined jurisdiction over the matter of foreign control.<\/p>\n

The award in TSA Spectrum de Argentina S.A. v. Argentina Republic, ICSID Case No. ARB\/05\/5<\/em> is available here: http:\/\/ita.law.uvic.ca\/documents\/TSAAwardEng.pdf<\/a><\/p>\n

A concurring decision by Professor Georges Abi-Saab is available here: http:\/\/ita.law.uvic.ca\/documents\/TSAAbi-SaabConcurring.pdf<\/a><\/p>\n

The dissenting opinion of arbitrator Grant D. Aldonas is available here: http:\/\/ita.law.uvic.ca\/documents\/TSADissent.pdf<\/a><\/p>\n