{"id":333,"date":"2008-09-10T04:04:00","date_gmt":"2008-09-10T09:04:00","guid":{"rendered":"http:\/\/itn.mattrock.ca\/2008\/09\/10\/continental-casualty-company-v-the-argentine-republic-argentina-emerges-largely-victorious-in-dispute-related-to-countrys-financial-crisis\/"},"modified":"2013-02-11T08:06:59","modified_gmt":"2013-02-11T14:06:59","slug":"award-continental-casualty-company-v-the-argentine-republic-argentina-emerges-largely-victorious-in-dispute-related-to-country-s-financial-crisis","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2008\/09\/10\/award-continental-casualty-company-v-the-argentine-republic-argentina-emerges-largely-victorious-in-dispute-related-to-country-s-financial-crisis\/","title":{"rendered":"Continental Casualty Company v. the Argentine Republic: Argentina emerges largely victorious in dispute related to country’s financial crisis"},"content":{"rendered":"

By Damon Vis-Dunbar
\nSeptember 10, 2008<\/strong><\/p>\n

In an award rendered on September 5, 2008, an arbitral tribunal has dismissed all but one of the claims brought by an American investor, Continental Casualty, against the government of Argentina. Argentina was found liable for damages of US$ 2.8 million plus interest: a fraction of the US$ 112 million sought by the claimant.<\/p>\n

The dispute\u2014one of a number that stem from Argentina\u2019s response to its financial crisis\u2014concerned an Illinois-based firm\u2019s investment in an Argentinean insurance company, CNA ART. CNA saw its portfolio of low-risk assets, such as cash accounts, treasury bills and government bonds, plunge in value as financial instruments in U.S. dollars were forcibly converted to pesos and asset transfers out of Argentina were restricted.<\/p>\n

In its claim, registered with ICSID<\/span> in 2003, Continental Casualty charged that Argentina had breached four provisions in the US-Argentina BIT<\/span>: (i) the requirement to observe contractual obligations; (ii) the requirement to provide compensation following an expropriation; (iii) the requirement to treat an investment fairly and equitably; (iiii) and finally, the requirement to protect the free transfer of assets.<\/p>\n

Argentina commenced its defense by portraying the scale of the economic depression that gripped the country in 2001-2002, in which the government says it \u201cfaced a terminal situation and had to forcibly change the economic plan of the country as a result of the devaluation of the local currency.\u201d As it has argued in other cases, Argentina maintained that the measures it implemented to rein in the crisis were \u201cproportional to the situation\u201d.<\/p>\n

Argentina absolved under\u00a0the \u201cstate of necessity\u201d defense<\/em><\/p>\n

Argentina\u2019s success in this case drew from invoking a provision in the US-Argentina BIT that takes into account a government\u2019s duty to maintain public order. Article 11 reads:\u00a0 \u201cThis Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the Protection of its own essential security interests.\u201d<\/p>\n

Argentina has turned to this provision, as well the \u201cstate of necessity\u201d standard under customary international law, in other investment arbitrations that relate to emergency measures enacted during its financial crisis; however, tribunals have differed on whether it absolves Argentina from alleged breaches of its investment treaty obligations.<\/p>\n

In this case, the tribunal was persuaded that a severe economic crisis, of the sort experienced by Argentina, qualified as an \u201cessential security interest\u201d. Moreover, the Government\u2019s measures to combat the crisis were, for the most part, deemed \u201cnecessary\u201d.<\/p>\n

The one exception related to Argentina\u2019s restructuring of treasure bills held by Continental Casualty. For several reasons, including the fact that Argentina\u2019s economy was returning to normality at the time the restructuring took place, the tribunal held that the measure could not be considered necessary. For this act, Argentina was found to have breached the Fair and Equitable Treatment standard of the BIT, for which it is liable for US$ 2.8 million in damages, plus interest.<\/p>\n

All other claims by Continental Casualty were dismissed. The Parties were ordered to bear their own legal costs and share the cost of administering the proceedings.<\/p>\n

The award is availabe from the ITN<\/span>\u00a0website\u00a0in English<\/a> and Spanish<\/a>.<\/p>\n

For other recent ITN reporting on awards involving the government of Argentina relating to the country\u2019s financial crisis, see:<\/p>\n

\u201cSecret $185 Million award against Argentina comes to light in D.C. Court<\/a>\u201d,
\nBy Luke Eric Peterson, Investment Treaty News, April 1, 2008.
\nThis report describes an award rendered in a dispute between Argentina and the UK energy firm British Gas. In awarding damages of US 185 million, the tribunal rejected Argentina\u2019s \u201cstate of necessity\u201d defense.<\/p>\n

\u201cArgentina liable for breaches of US-Argentina BIT in claim by US gas co. Sempra;
\nlatest award to be rendered in spate of financial crisis claims by foreign investors<\/a>\u201d, Investment Treaty News, October 15, 2008.
\nThis report describes an award rendered in a dispute between Argentina and the US gas company, Sempra Energy. The tribunal in this case also rejected Argentina\u2019s \u201cstate of necessity\u201d defense.<\/p>\n