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LG&E v. Argentina

Type of decisionDecision on liability
Date of decision3 October 2006
Tatiana B. de Maekelt (President)
Albert Jan van den Berg
Francisco Rezek
Legal instrumentBIT between Argentina and USA (1991)
Related decision(s)Decision of the Arbitral Tribunal on Objections to Jurisdiction, 30 April 2004
Further information

Statements from this decision

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In international law and in accordance with the ELSI case, arbitrariness is a wilful disregard of due process of law, an act which shocks, or at least surprises, a sense of juridical propriety
Customary international law does not require a state measure to be “egregious” in order to constitute an international delinquency
IITs must be interpreted using the rules of interpretation laid down in the VCLT
General remarks regarding Article 25 ILC Articles on State Responsibility
An expropriation requires a certain degree of interference with the investment; a substantial deprivation of the investor is necessary
The benefit of property is effectively neutralized where the investor is no longer in control of the investment or where he or she cannot direct the investment's day-to-day operations
Usually, expropriation requires a lasting interference with property rights
A direct expropriation is the forcible appropriation by the state of the tangible or intangible property by means of administrative or legislative action
Protection against indirect expropriation includes protection against creeping expropriation
Due to its sovereign power, a state may expropriate property, subject to the requirements of international law and the IIT
Determining whether an indirect expropriation took place requires a balancing of the state's right to regulate and the effect of the measure (so-called police powers doctrine)
"Tantamount to Expropriation" refers to creeping and de facto expropriation; both effectively neutralize the benefit of property
Due to its sovereign power, a state may expropriate property, subject to the requirements of international law and the IIT
General remarks on fair and equitable treatment
A violation of the FET standard does not require bad faith
The legitimate expectations of the investor can be a relevant factor within the standard of fair and equitable treatment
The stability of the legal and business framework is an essential element of fair and equitable treatment
Definition of arbitrary
A measure is discriminatory if the intent of the measure is to discriminate or if the measure has a discriminatory effect; as mentioned in the ELSI case, this requires an intentional treatment in favour of a national against a foreign investor and that the measure is not taken under similar circumstances against another national
The violation of obligations set forth in domestic law can constitute a breach of an umbrella clause
The exception clause in the IIT between the USA and Argentina, regarding e.g. measures necessary for the maintenance of public order, is not self-judging
The exception clause in the IIT between the USA and Argentina, regarding e.g. the protection of a state's own essential security interests, is applicable to an economic crisis
The fact that the respondent is a signatory party to the IIT and the investor grounds his or her claim on the provisions of the IIT does not imply an agreement by the parties as to the applicable law
The term "as may be applicable" does not condition the application of international law; it refers to the competent rules within international law
A tribunal does not need to resort to the respondent's rules of conflict of law if the parties refer to the law of the respondent and the dispute relates to an investment in the respondent's territory; in that case, the respondent's domestic law is applicable
The term "rules of international law as may be applicable" refers to general international law, including customary international law
According to Article 42 (1)(2) ICSID Convention, domestic and international law have to be applied cumulatively
If a contractual agreement between claimant and respondent is missing, this favours, in the first place, the application of international law


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