Argentina Investment Protections

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1. INVESTMENT TREATIES

The Argentine Republic entered into 58 bilateral investment treaties between 1990 and 2001,[1] with 54 of them having actually entered into force.[2] In 26 of these cases, the BIT was supplemented by one or more Protocols,[3] which typically deal with clarifications or interpretative agreements regarding the requirements for an investment or investor to qualify for protection under the BIT. The Argentine Republic is also a member of the MERCOSUR regional trade and customs agreement and related protocols, which include two protocols dealing with matters of investment law. These instruments, drafted and executed in 1994, have not as yet come into force.[4]

2. INVESTMENT DISPUTES

The Argentine Republic is the country which has been sued the most under the structure created by the BITs and the rules of ICSID. Most of these cases arose from a single set of facts: the economic crisis and social collapse of 2001, and the measures consequently taken by the Argentine State to offset the crisis and its consequences. However, not all cases resulted from those facts, so in this chapter the cases are divided into (a) non-emergency cases, and (b) emergency cases.[5]

The category of “non-emergency cases” consists broadly of cases commenced prior to the 2001 crisis and in which claims mostly do not relate to the “pesification” of the Argentine Republic’s economy. Most of these claims have been resolved by negotiation between the foreign investor and the Argentine Republic[6] or final ICSID awards.

. . .

[The emergency cases, on the other hand, generally relate to the economic crisis and social collapse of 2001. The historical context that gave rise to the crisis, however, began to emerge much earlier.] During the 1990s, under the influence of the Washington Consensus, Argentina applied significant structural reforms to the organization of its economy. These reforms reversed the economic and social structures that had characterized the Argentine economy for nearly fifty years, which had deposited in the hands of the State the provision of most public services.

. . .

Another feature of this era was the “Convertibility Law.” During the 1980’s, most developing economies suffered inflationary processes. The Argentine Republic was not an exception. Towards the end of the decade, hyperinflation struck Argentina. Then-President Carlos Menem, who had won the presidential elections campaigning for a “populist” shift, changed course to embrace neo-conservative policies in tune with the ideas that prevailed worldwide during the 1990s. Among them, a convertibility system or convertibility board was adopted for the purpose of ending the hyperinflation process, pegging the local currency to the U.S. dollar and establishing an obligation to maintain a currency reserve in U.S. dollars for every peso in circulation in Argentina.

The policy of currency convertibility brought about both positive and negative consequences for Argentina’s economy. Without a doubt, the largest positive contribution was the impact that the convertibility policy had on the inflation process. The negative consequences of the model exacerbated the 2001 crisis, worsening the negative economic impact that external factors had on Argentina’s economy: a historic fall in international prices of commodities and the rising exchange rate of the U.S. dollar (to which the economy Argentina was attached). Furthermore, beginning in 1998, Argentina entered a severe recession, which was especially aggravated by the Brazilian currency devaluation, Brazil being the main trading partner for Argentina. The financial crises in emerging markets, particularly the Russian crisis, had made the financial market more expensive for emerging countries, including Argentina. The association of all these factors shaped a perfect storm, which produced the most extensive financial and economic crisis in modern times. As with other crises, this led to a statutory recalculation of the exchange rates at which currency was valued against its underlying value measure.

[1] Bilateral investment treaties were concluded with (in alphabetical order): Algeria, Armenia, Australia, Austria, Belgium/Luxembourg, Bolivia, Bulgaria, Canada, Chile, China, Costa Rica, Croatia, Cuba, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Finland, France, Germany, Greece, Guatemala, Hungary, India, Indonesia, Israel, Italy, Jamaica, Lithuania, Malaysia, Mexico, Morocco, Netherlands, New Zealand, Nicaragua, Panama, Peru, Philippines, Poland, Portugal, Romania, Russia, Senegal, South Africa, South Korea, Spain, Sweden, Switzerland, Thailand, Tunisia, Turkey, the Ukraine, the United Kingdom, the United States, Venezuela and Vietnam.

[2] The bilateral investment treaties with Dominican Republic, Greece, New Zealand and Senegal have as yet not entered into force.

[3] The following treaties have been supplemented by Protocols: Armenia, Australia, Bolivia, Bulgaria, Chile, China, Costa Rica, Germany, Indonesia, Israel, Italy, Lithuania, Mexico, Netherlands, Panama, Peru, Portugal, Romania, Russia, South Africa, South Korea, Spain, Sweden, Switzerland, the United States and Venezuela.

[4] The Colonia Protocol of 17 January 1994 deals with investment from member States within MERCOSUR, and the Buenos Aires Protocol of 5 August 1994 deals with investment from States other than MERCOSUR members.

[5] The Argentine Republic is one of the few States that has assumed its defense before international investment tribunals internally. The Procuración del Tesoro de la Nación has undertaken the international defense of the Argentine Republic since the year 2000. Before that, Argentina was represented by the Ministry of Foreign Affairs. In few and exceptional cases, the Argentine Republic has also been represented by outside co-counsel, including the law firms of Cleary Gottlieb Steen & Hamilton LLP and Gleason & Koats LLP – in the latter case, representing the Argentine Republic in the U.S. federal courts in Washington D.C. in proceedings brought in connection with the UNCITRAL awards rendered in the cases of BG and National Grid: Republic of Argentina v. BG Group, 1:08-cv-485-RBW (D.D.C.); Republic of Argentina v. National Grid, 1:09-cv-00248-RBW (D.D.C.).

[6] Those cases, not discussed here, include, among others, Lanco International Inc. v. Argentine Republic, ICSID Case No. ARB/97/6, and Mobil Argentina S.A. v. Argentine Republic, ICSID Case No. ARB/99/1.