* This text was reproduced and reformatted from the text appearing at the ICSID website (visited January 19, 2007) <.http://www..worldbank.org/icsid>

1 CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/Ol/8, Award, 12 May 2005, 44 ILM 1205 (2005).

2 LG&E Energy Corp., LG&E Capital Corp., LG&E Interna tional Inc. v. The Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 3 October 2006.

3 The Centre was established pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 18 March 1965,4 ILM 532 (1965).

4 Article XI Argentina-US BIT (1994), signed 14 November 1991; entered into force 20 October 1994; available at <// www.unctad.org/sections/dite/iia/docs/bits/argentina_us.>

5 LG&E, supra footnote 2, para. 72.

6 LG&E Energy Corp., LG&E Capital Corp., LG&E Interna tional Inc. v. The Argentine Republic, ICSID Case No. ARB/ 02/1, Decision on Objections to Jurisdiction, 30 April 2004.

7 LG&E, Decision on Jurisdiction, supra footnote 6, para. 63.

8 LG&E, supra footnote 2, para. 42.

9 Ibid., para. 60.

10 Ibid., paras. 64, 65.

11 Ibid., para. 68.

12 C f. Christoph Schreuer, The ICSID Convention: A Commentary 622 (2001); Emanuel Gaillard and Yas Banifatemi, TheMeaning of “and” in Article 42(1), Second Sentence, of theWashington Convention: The Role of International Law in the ICSID Choice of Law Process, 18 ICSID Review-FILJ 375 (2003).

13 See LG&E, supra footnote 2, para. 99.

14 Article 11(2) Argentina-US BIT, supra footnote 4.

15 Vienna Convention on the Law of Treaties, 1155 UNTS 331, 8 ILM 679 (1969).

16 LG&E, supra footnote 2, para. 131.

17 See, in particular, the famous demands of the Teemed tribunal, Técnicas Medioambientales Teemed, S.A. v. United MexicanStates, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003,43 ILM 133 (2004), para. 154 (“The foreign investor expects the host State to act in a consistent manner, free from ambiguity and totally transparently in its relations with the foreign inves tor, so that it may know beforehand any and all rules and regulations that will govern its investments, as well as the goals of the relevant policies and administrative practices or directives, to be able to plan its investment and comply with such regulations.“); see also MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award, 25 May 2004, 44 ILM 91 (2005), para 113.

18 See the restrictive notion of fair and equitable treatment viola tions in Waste Management v. Mexico, Award, 30 April 2004, 43 ILM 967 (2004), para 98 (“[T]he minimum standard of treatment of fair and equitable treatment is infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety - as might be the case with a manifest failure of natural justice in judicial pro ceedings or a complete lack of transparency and candour in an administrative process.“); see also S.D. Myers, Inc. v. Gov ernment of Canada, Partial Award of 13 November 2000, 40 ILM 1408 (2001).

19 CMS, supra footnote 1, para. 276.

20 CMS, supra footnote 1, paras. 275, 276, 281; LG&E, suprafootnote 2, paras. 132, 133.

21 CMS, supra footnote 1, para. 295; LG&E, supra footnote ,paras. 147, 163.

22 LG&E, supra footnote 2, paras. 147, 148.

23 Schreuer, Cf. Christoph H., Travelling the BIT Route. Of Waiting Periods, Umbrella Clauses and Forks in the Road, 5 Thejournal of world investment&Trade 231 (2004)Google Scholar; Wälde, Thomas, The Umbrella Clause in Investment Arbitration. A Comment on Original Intentions and Recent Issues, 6 The journal of world investment&Trade 183 (2005).Google Scholar

24 SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, Decision on Jurisdic tion, 6 August 2003, 42 ILM 1290 (2003), para. 172.

25 SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/02/6, Decision on Jurisdic tion, 29 January 2004, 8 ICSID Reports 515, para. 128.

26 LG&E, supra footnote 2, para. 175.

27 Cf. Methanex Corporation v. United States of America, NAFTA Arbitral Tribunal, Final Award on Jurisdiction andMerits, 3 March 2005, available at<//ita.law.uvic.ca/docu- ments/MethanexFinalAward.pdf>; Saluka Investments BV (The Netherlands) v. The Czech Republic, UNCITRAL Partial Award, 17 March 2006, available at <//ita.law.uvic.ca/documents/Saluka-PartialawardFinal.> See also Andrew Newcombe, The Boundaries of Regulatory Expropriation in International Law, 20 ICSID REVIEW-FOREIGN INVESTMENTLAW JOURNAL 1 (2005); Catherine Yannaca-Small, “IndirectExpropriation” and the “Right to Regulate” in International Investment Law, Working Papers on International Investment, Number 2004/4, OECD (2004).

28 LG&E, supra footnote 2, para. 189.

29 Ibid, at para. 191.

30 LG&E, supra footnote 2, para. 193.

31 Ibid, at para. 189.

32 LG&E, supra footnote 2, para. 195.

33 Ibid, at para. 200.

34 LG&E, supra footnote 2, paras. 201-202.

35 Article XI Argentina-US BIT, supra footnote 4, provides:“This Treaty shall not preclude the application by either Partyof measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace and security, or the protection of its own essential security interests.“

36 Articles on Responsibility of States for Internationally Wrongful Acts, in: Report of the International Law Commission onthe Work of Its Fifty-third Session, UN GAOR, 56th Sess., Supp. No. 10,43, UN Doc. A/56/10 (2001), UN Doc. A/RES/ 56/83 (2001).

37 LG&E, supra footnote 2, para. 245.

38 Ibid., para. 213.

39 See in more detail August Reinisch, Necessity in International Investment Arbitration - An Unnecessary Split of Opinions in Recent ICSID Cases? Comments on CMS v. Argentina andLG&E v. Argentina, 8 THE JOURNAL OF WORLD INVESTMENT & TRADE (forthcoming).

40 LG&E, supra footnote 2, para. 257.

41 Ibid., para. 264.

1 Until 1 December 2005, Claimants were LG&E Energy Corp.,LG&E Capital Corp. and LG&E International Inc. However,on 26 January 2006, Claimants informed the Tribunal that thename of two of the companies had been modified: LG&E Energy Corp. is now E.ON.US LLC and LG&E Capital Corp.is now E.ON.US. Capital Corp. LG&E International Inc. keptits name. Upon request by the Tribunal, LG&E submitted documents that, in the Tribunal's opinion, only prove thechange of name but not its effects. Respondent remained silenton this issue.

2 The austral later was replaced by the peso at the rate of 1,000 australs to 1 peso.

3 Schreuer, , Christoph, , The ICSID Convention: A Commentary, Cambridge University Press, 2001, p. 573.Google Scholar

4 Amco Asia Corporation and others v. Republic of Indonesia,Award of 20 November 1984, 1 ICSID Rep. 413 (1993).

5 “It simply means that the relevant rules of international laware to be applied.” Schreuer, Cristoph, The ICSID Convention … op.cit., p. 622.

6 Convention CIRDI, Art. 42: “(1) (1) Le Tribunal statue surle différend conformément aux règies de droit adoptées parles parties. Fauted'accord entre les parties, le Tribunal applique le droit de VEtat contractant partie au différend —y com-pris les règies relatives aux conflits de lois—ainsi que les principes de droit international en la matière” (emphasisadded). In:http:/Avww.worldbank.org/icsid/basicdoc-fra/partA-chapO4. htm#sO3.

7 ”… the treaties and concordats are hierarchically superior thanlaws…“

8 Tawil, Guido Santiago, Los conflictos en materia de inversión, la jurisdicción del CIADIy el Derecho aplicable: a propósitode las recientes decisiones en los casos “Vivendi”, “Wend” y “Maffezini”, in RAP, October 2002 Year XXV, N° 239, pp. 241 et seq., especially pp. 256-257.

9 Idem, p. 256. The author bases his opinion on the Vivendi case.

10 Ibidem.

11 See Investmen for foreigners in Argentina: www, enplenitud. com/

12 Naón, Grigera, Horacio, , Choice of Law Problems in International Commercial Arbitration, J.C.B. Mohr (Paul Siebeck)Tubingen, Germany, 1992, p. 115.Google Scholar

13 Chillida, Vives, Julio, , El Centro Internacional de Arreglos de Diferencias Relativas a Inversiones(CIADI),Madrid,McGraw Hill, 1998, p. 195.Google Scholar

14 Schreuer, Christoph, The ICSID Convention… op. cit., p. 623.

15 Gaillard, , Emmanuel, and Banifetami, , Yas, , The Meaning of “and” in Article 42(1), second sentence, of the Washington Convention: The Role of International Law in the ICSID choice of the law process, ICSID Review, Foreign Investment Law Journal, 2003, Vol. 12, No. 2, pp. 375 CrossRefGoogle Scholar et seq., especiallypp. 381-382. See also: Schreuer, Christoph, op. cit, p. 263.

16 Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case N° ARB/98/4, Decision on Application for Annulment, Feb.5, 2002, 41 ILM 933 (2002).

17 Asian Agricultural Products Ltd. (AAPL) v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/87/3,Final Award, June 27, 1990, 6 ICSID Review 533 (1991).

18 Técnicas Medioambientales Teemed S.A. v. The United Mexi can States, ICSID Case No. ARB (AF)/00/02 Award I 154 (29 May 2003); MTD Equity Sdn. Bhd. and MTD Chile S.A.v. Republic of Chile, ICSID Case No. ARB/01/7 Award f113 (25 May 2004); Occidental Exploration and ProductionCompany v. The Republic of Ecuador, LCIA Case No. UN 3467 Final Award (1 July 2004).

19 Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v.The Republic of Estonia, ICSID Case No. ARB/99/2 Award,f 367 (25 June 2001).

20 Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)99/2, Award, I 116 (October 11, 2002).

21 See Genin, footnote No. 19 supra.

22 Robert Azinian and others v. United Mexican States, ICSID Case No. ARB(AF)/97/2, Award, H 83 and 87, (1 November 1999).

23 S.D. Myers, Inc. v. Government of Canada, NAFTA Arbitration under UNCITRAL Rules, Partial Award, 1263, (13 November 2000).

24 Article 41.1 provides: “Transportation and Distribution rates shall be calculated in United States dollars. The resulting Rate Schedule shall be stated in Argentine pesos and shall be convertible as stated in Law No. 23,928, using for the retranslation into Argentine pesos the parity set forth in Article 3 of Argentine Presidential Decree No. 2,128/91.“

25 Section 9.2 provides: “The tariff has been calculated in U.S. dollars. The adjustments referred to in point 9.3 will be calculated in U.S. dollars.“

26 Section 9.4.1.1 provides:’ ‘Distribution tariffs will be adjusted semiannually according to the variation operated in the PPL“

27 Article 38 provides: “The services rendered by distributors will be offered at tariffs in line with the following principles: a)To provide distributors who operate economically and prudently the opportunity to obtain sufficient income to meet all reasonable operating costs applicable to the service, taxes, amortization, and a reasonable rate of return, as determined in the following article.“

28 Section 9.8 provides: “Licensee's tariff system will not be subject to freezing, administration and/or price control. If, in spite of this stipulation, Licensee is forced to adapt to a price control system establishing a lower level than that arising from the Tariff, Licensee will have the right to be compensated by the Government in an equivalent amount.“

29 The notion of a standard appeared for the first time in a 1948 treaty, the Havana Charter for an International Trade Organization, and it was considered a protection against state actions violating internationally-accepted rules. In the 1960s it was related to the protection given to foreign properties. In international case law, the standard existed pursuant to the interpretation provided in the 1920s in the emblematic Neer case, which required that State conduct be deemed outrageous, wrongful, open injustice, an atrocity, bad faith or voluntary negligence of duty for a violation to be found. That interpreta tion is not the same that is given today. What was considered an “atrocity” in 1926 might not be so today, and what may be considered “violent” now, may not have been at that time. See ‘ ‘Fair and Equitable Treatment Standard in International Investment Law”, OECD, Working Paper on International Investment, November 2003/4.

30 See, e.g., CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8 Award (12 May 2005) (Argentina-U.S. BIT,); Occidental Exploration and Produc tion Company v. The Republic of Ecuador, LCIA Case No. UN 3467 Final Award (1 July 2004) (U.S.-Ecuador BIT - almost identical language); MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7 Award ¶ 113(25 May 2004) (Malaysia-Chile BIT); Metalclad Corporation v. United Mexican States, ICSID Case No. AR- B(AF)/97/l Award ¶ 75 (30 August 2000). (An underlying objective of Article 102(1) of NAFTA is “to promote and increase cross-border investment opportunities and ensure the succesful implementation of investment initiatives“).

31 CMS, ¶ 274; Occidental, ¶ 183. See also Metalclad, f 99 (’ ‘Mexico failed to ensure a transparent and predictable frame work for Metalclad's business planning and investment“).

32 MTD, ¶113.

33 Técnicas Medioambientales Teemed S.A. v. The United Mexi can States, ICSID Case No. ARB(AF)/00/02, Award ¶ 154 (29 May 2003); cited in e.g., MTD, ¶ 114; Occidental, ¶185; CMS, ¶279.

34 Waste Management, Inc. v. The United Mexican States, ICSID Case No. ARB(AF)/00/3, Award ¶ 98(30 April 2004).

35 See e.g., Teemed, ¶ 154; CMS, ¶¶R 278-79 and Occidental, ¶ 185 (citing the Teemed and Metalclad passages referring to transparency).

36 Genin, ¶ 367.

37 Ibidem.

38 See, e.g., Mondev, ¶ 116 October 11, 2002 (“To the modern eye, what is unfair or inequitable need not equate with the outrageous or the egregious. In particular, a State may treat foreign investment unfairly and inequitably without necessar ily acting in bad faith.“); see also Occidental, ¶ 63 (“this is an objective requirement that does not depend on whether the Respondent has proceeded in good faith or not.“); see also Teemed, ¶ 153 (relying on Mondev); Waste Management, ¶ 93 (rejecting the standard set forth in the Neer case involving willful neglect of duty and bad faith).

39 As described more fully below, Argentina is excused from liability for the measures taken during the extreme circum stances of December 2001 until April 2003 in order to maintain public order and protect its essential interests. It was fair that during this period of time, Argentina suspended the guarantees of the Gas Law and postponed the PPI tariff adjustments until such time as the Government could manage to resume its obligations.

40 See Vandevelde, , J., Kenneth, United States Investment Trea ties: Policy and Practice, Kluwer Law and Taxation, 1992, p. 77.Google Scholar

41 Elettronica Sicula S.p.A. (ELSI) (United States of America v. Italy), 1989 I.C.J. 15, 76 (Judgment of 20 July).

42 Ronald S. Lauder v. The Czech Republic, Final Award ¶ 221 (3 September 2001) (citing Black's Law Dictionary 100 (7^thed. 1999)).

43 Preamble, Argentina - U.S. BIT (1994).

44 Genin, ¶ 370.

45 Ibidem.

46 Lauder, ¶ 222-32.

47 Lauder, ¶¶229, 232.

48 See e.g., CMS, 1300 (citing cases).

49 CMS, ¶303; SGS v. Republic of the Philippines, Decision on Jurisdiction, ICSID Case No. ARB/02/6 (29 January 2004), ¶¶127-28.

50 SGS v. Philippines, I 121 (“For [the umbrella clause] to be applicable, the host State must have assumed a legal obligation, and it must have been assumed vis-a-vis the specific investment - not as a matter of the application of some legal obligation of a general character.“).

51 CME Czech Republic v. Czech Republic, Partial Award, f 604 (13 September 2001).

52 Pope&Talbot Inc. v. Canada, Interim Award, ¶ 100 (26 June 2000).

53 Pope&Talbot, ¶¶101-02.

54 Teemed, ¶115.

55 Ibidem.

56 Ibidem.

57 Teemed, ¶¶122.

58 Restatement (Third) of the Foreign Relations Law of the United States, American Law Institute, Volume 1, 1987, Sec tion 712, Comment g.

59 Too v. Greater Modesto Insurance Associates, 23 Iran-United States Cl. Trib. Rep. 378, Award of 29 December 1989.

60 Oscar Chirm affair, P.C.I.J, 1934, Ser A/B, Case No. 63.

61 Respondent has not relied upon the third element of Article XI, “the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security.”

62 Article 25 of the Draft Articles on Responsibility of States for Internationally Wrongful Acts provides: “Necessity may not be invoked by a State as a ground for precluding the wrongfulness of an act not in conformity with an international obligation of that State unless the act: Is the only way for the State to safeguard an essential interest against a grave and imminent peril; and Does not seriously impair an essential interest of the State or States towards which the obligation exists, or of the international community as a whole. In any case, necessity may not be invoked by a State as a ground for precluding wrongfulness if: a) The international obligation in question excludes the possibility of invoking necessity; or b) The State has contributed to the situation of necessity.” The ILC's Draft Articles, after some debate regarding the original prepared under the auspices of the Society of Nations in 1930, was abandoned and then resumed by the General Assembly in 1963. Its definitive version, due mainly to the works of Mssrs. Roberto Ago, Willem Riphagen and Gaetano Arangio-Ruiz, was approved in 1981 and subject to a revision in 1998, which was approved in 2001, during the 85^th plenary session of the United Nations’ General Assembly. (Session dated 12 December 2001, during the fifty-sixth session, Agenda item 162 of the Program, A/RES/56/83).

63 United Nations, Report A/CN.4/318/ADD.5, p. 3.

64 Strupp. K., Les règies générates du Droit de lapaix, RECUEIL DES COURS, 1934 I, T. 47, pp. 259-595, especially p. 568. Similarly, the ILC has defined the state of necessity as that situation where the only means of safeguarding an essential interest of the State against a grave and imminent peril is an act that is not in conformity with an international obligation binding that State with another State. In shaping the concept of state of necessity, one must make a compulsory reference to the Russian seal furs case. There, the Russian government banned the hunting of seals near the Russian shorelines, in cluding international waters and founded such decision on the absolute need to adopt immediate provisional measures. In a communication addressed, on the occasion of this incident, by the Russian foreign Minister, Chickline, to the British Ambassador, Morier, the main elements of the state of neces sity were established: the absolutely exceptional nature of the alleged situation; the imminent character of the threat against an important State interest; the impossibility of avoiding the risk with other means, and the necessarily temporary nature of this justification, linked to the due danger's persistence. See United Nations, Report of the International Law Commis sion on the work performed during its 32^nd session, p. 87.

65 United Nations, Report A/CN.4/315, p. 78.

66 Crawford, James, Second Report on State Responsibility, UN General Assembly, International Law Commission, 51^st Ses sion, Geneva, 23 July 1999, A/CN.4/498/Add 2, p. 27-28.

67 United Nations, Report A/CN.4/SER.A/1980, pp. 155 and 175.

68 Ibidem.

69 United Nations, Report A/CN.4/SER.A/1980, p.174.

70 Ibidem.

71 Crawford, James, Second Report on State Responsibility, op. cit, p. 30.

72 Ibidem.

73 United Nations, Report A/CN.4/318/ADD.5-7. p. 20.

74 Crawford, James, Second Report on State Responsibility op. cit., p. 31. In fact, this is so reflected in Principle 15 of the Rio Declaration on Environment and Development, adopted by the United Nations’ Conference on Environment and Development in 1992.

75 United Nations, Report A/CN.4/318/ADD.5-7. p. 20.

76 Crawford, , James, , The International Law Commission's Arti¬ cles on State Responsibility, Cambridge University Press, 2002, p. 178 et seq.Google Scholar

77 The period before the state of necessity initiates with the injunction issued by the Argentine Court on 18 August 2000.