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Siemens v. Argentina

Type of decisionAward
Date of decision6 February 2007
Tribunal
Andrés Rigo Sureda (President)
Charles N. Brower
Domingo Bello Janeiro
Legal instrumentBIT between Argentina and Germany (1991)
Related decision(s)Decision on Jurisdiction, 3 August 2004
Further informationFull text of the decision

Statements from this decision

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International Investment Treaties (IITs)
International Law Rules Applicable to IITs
Law of Treaties
Rules of Interpretation
Interpretation Rules of the Vienna Convention on the Law of Treaties (VCLT) as Reflecting Customary International Law
IITs must be interpreted using the rules of interpretation laid down in the VCLT
Object and Purpose as a Rule of Interpretation
If the purpose of an IIT is to promote and protect investments, it would be inconsistent with such commitments to consider that an IIT party has breached its FET obligation only when it has acted in bad faith
Interpretation in the Context of the Treaty
The meaning of the terms “justly and fairly” under international law is influenced by their ordinary meaning, the evolution of international law and the specific context in which they are used
Law of State Responsibility
Attribution of Acts
General Remarks
For a state to incur international responsibility it must use its public authority by acting with superior governmental power.
The ILC Draft Articles are currently considered to reflect most accurately customary international law on state responsibility
A creeping expropriation is a composite act within the meaning of Article 15(1) ILC Draft Articles
Restitution and Compensation
The law applicable to the determination of compensation for an unlawful expropriation is customary international law
Under customary international law, the investor is not only entitled to the value of its enterprise as of the date of the unlawful expropriation, but also to any greater value that enterprise has gained up to the date of this Award, plus any consequential damages
Protection of Investors under IITs
Expropriation and Standards of Protection
Expropriation
Scope of Protection
Contractual rights, whether tangible or intangible, are capable of being expropriated
General Requirements of an Expropriatory Act
Degree of Interference
Creeping expropriation refers to a process with different steps, where each step must have an adverse effect on the investment but by itself may not be significant; the last step in a creeping expropriation tilts the balance to the expropriatory nature of the process
Further Problems
For a state to incur international responsibility it must use its public authority by acting with superior governmental power.
A creeping expropriation is a composite act within the meaning of Article 15(1) ILC Draft Articles
A state’s intent to expropriate must be differentiated from the purpose of the expropriation, which is one of the requirements for determining whether the expropriation is in accordance with the IIT terms and not for determining whether an expropriation has occurred
Indirect Expropriation / Regulations
Right to Regulate
Creeping expropriation refers to a process with different steps, where each step must have an adverse effect on the investment but by itself may not be significant; the last step in a creeping expropriation tilts the balance to the expropriatory nature of the process
Legality of an Expropriation
A state’s intent to expropriate must be differentiated from the purpose of the expropriation, which is one of the requirements for determining whether the expropriation is in accordance with the IIT terms and not for determining whether an expropriation has occurred
Fair and Equitable Treatment
Relationship to Public International Law
The meaning of the terms “justly and fairly” under international law is influenced by their ordinary meaning, the evolution of international law and the specific context in which they are used
Character and Scope
If the purpose of an IIT is to promote and protect investments, it would be inconsistent with such commitments to consider that an IIT party has breached its FET obligation only when it has acted in bad faith
Case Groups
Further Cases
When a government awards a contract, which includes among its critical provisions an undertaking of that government to conclude agreements with its provinces, the same government can not argue that the structure of the state does not permit it to fulfil such undertaking
Arbitrary and Discriminatory Measures
The ordinary concept of arbitrariness does not contain an element of bad faith.
A discriminatory measure does not require a discriminatory intent by the government
The impact of the measure on the investment is the determining factor to ascertain whether it had resulted in non-discriminatory treatment
Full Protection and Security
Character and Scope
The obligation to provide full protection and security is wider than “physical” protection and security and also protects intangible assets
The initiation of a renegotiation of a contract for the sole purpose of reducing its costs, unsupported by any declaration of public interest, may affect the legal security of an investment
Applicable Law / Choice of Law Clauses
A choice of law clause contained in an IIT constitutes an agreement within the meaning of Article 42(1) ICSID Convention
Contract and Treaty Claims
Distinction of Contract and Treaty Claims
For the behaviour of a state as a party to a contract to be considered an IIT breach, a state has to act in its capacity as a sovereign state, not as a contracting party
Investment Contracts
For the behaviour of a state as a party to a contract to be considered an IIT breach, a state has to act in its capacity as a sovereign state, not as a contracting party
Investment Treaty Arbitration
Damages and Interest
General Remarks
The law applicable to the determination of compensation for an unlawful expropriation is customary international law
Basis for Calculating Damages
The value of the investment to be compensated is the value as of the date of this Award, unless such value is lower than at the date of expropriation, in which event the earlier value would be awarded
To calculate the fair market value of an investment, the book value method is applied to recent investments and the DCF method is applied to calculate future profits; under exceptional circumstances, both methods may be combined
Interest
Interest Absent Explicit Rules
The determination of the applicable interest rate must be guided by the principle of ensuring the “full reparation for the injury suffered as a result of the internationally wrongful act.”; the rate of interest to be taken into account is therefore not the rate associated with corporate borrowing but the interest rate the amount of compensation would have earned had it been paid after the expropriation
A tribunal may award compound interest
Date From Which Interest Should be Granted
For purposes of erasing the effects of the expropriation, interest should accrue from the date the Tribunal has found that expropriation occurred
Relationship of Damages and Compensation for Expropriation
Under customary international law, the investor is not only entitled to the value of its enterprise as of the date of the unlawful expropriation, but also to any greater value that enterprise has gained up to the date of this Award, plus any consequential damages
Further Problems
With respect to the determination of compensation Article I of the First Protocol to the European Convention on Human Rights permits a margin of appreciation not found in customary international law or the BIT in question
ICSID Convention
Arbitration (Articles 36-55)
Article 42
Article 42(1)
Article 42(1)(1) - "rules of law as may be agreed by the parties"
A choice of law clause contained in an IIT constitutes an agreement within the meaning of Article 42(1) ICSID Convention
Article 42(1)(2) - "absence of such agreement"
According to Article 42 (1)(2) ICSID Convention, domestic and international law have to be applied cumulatively

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