Summary

Source: icsid.worldbank.org

TABLE OF CONTENTS

I. INTRODUCTION AND PARTIES
II. PROCEDURAL BACKGROUND
III. FACTUAL AND LEGAL BACKGROUND OF THE DISPUTE
1. Situation of the Electricity Market in Argentina Prior to Reforms
2. Reform to the Legal Framework
A. The Electricity Law
i. Governmental and Regulatory Entities
a. Secretariat of Energy
b. CAMMESA
c. ENRE
ii. The Electricity Market: Generation and Dispatch
a. Participants
b. The MEM: Term and Spot Markets
c. Uniform Rate and Economic Cost of the System
d. Spot Price
e. Capacity Payments and Risk of Failure Price
f. Stabilization Fund
3. The Claimant's Investment
A. Central Térmica San Nicolás ("CTSN" or "San Nicolás")
B. Cabra Corral and El Tunal
C. Ullum and Central Sarmiento
D. Alicurá
E. Paraná
F. TermoAndes
4. The Crisis
5. Regulatory Changes to the Electricity Sector
A. Resolution SE No. 8/2002
B. Resolution SE No. 317/2002
C. Resolution SE No. 240/2003
D. Resolutions SE N° 406/2003 and SE N° 943/2003
E. Resolution SE No. 712/2004
F. Resolution SE No. 826/2004
G. Resolution SE No. 1427/2004
H. Resolution SE No. 3/2005
I. Resolution SE No. 1281/2006
J. Resolution No. 1506/2006
K. Resolution SE No. 564/2007
L. Resolution SE No. 724/2008
M. Resolution SE No. 95/2013
N. Decree 134/2015
O. Resolution No. 6/2016
P. Resolution SEE No. 21/2016
Q. Resolution SEE No. 19-E/2017
R. Resolution SGE No. 70/2018
S. Disposition SEE No. 97/2018
T. Resolution SE No. 1/2019
U. Law No. 27.541
V. Resolution SE No. 12/2019
W. Resolution SE No. 31/2020
6. Initiation, Suspension and Recommencement of the Arbitration
A. The Suspension Agreement
B. The 2005 Definitive Agreement
IV. APPLICABLE LAW
V. PRELIMINARY ISSUES
1. Admissibility of the Claim: Waivers, Consent and Estoppel
A. The Respondent's Position
B. The Claimant's Position
C. The Tribunal's Analysis
i. Whether the Claimant Waived its Claims
ii. Claimant's Consent or Acquiescence
iii. Whether the Claimant is Estopped from bringing the Claim
iv. Abuse of Rights
2. Defense under Article XI
A. The Respondent's Position
B. The Claimant's Position
C. The Tribunal's Analysis
i. The Standard under Article XI for Non-precluded Measures
ii. Whether Argentina Fulfills the Requirements of Article XI
VI. MERITS OF THE DISPUTE
1. The Overall Position of the Parties
A. The Claimant's Underlying Claim
B. The Respondent's Overall Position
2. Fair and Equitable Treatment (FET) Claim
A. The Claimant's Position
B. The Respondent's Position
C. The Tribunal's Analysis
i. Whether the Respondent's conduct constitutes a breach of the FET standard
a. Preliminary Considerations
b. Measures affecting Spot Price Formation and Dispatch
c. Measures affecting Capacity Payments
d. Withholding of Receivables and Investment Programs
e. Cost-Plus System and Prohibition of PPAs
3. Full Protection and Security (FPS) Claim
A. The Claimant's Position
B. The Respondent's Position
C. The Tribunal's Analysis
4. Minimum Treatment Claim
A. The Claimant's Position
B. The Respondent's Position
C. The Tribunal's Analysis
5. Arbitrary and Discriminatory Measures Claim
A. The Claimant's Position
B. The Respondent's Position
C. The Tribunal's Analysis
i. The Standard applicable to Article II.2.b) of the BIT
ii. Measures affecting Spot Price Formation and Dispatch
iii. Measures affecting Capacity Payments
iv. Withholding of Receivables and Investment Programs
v. Cost-Plus System and Prohibition of PPAs
6. State of Necessity Defense under Article 25 of the Articles on Responsibility of States for Internationally Wrongful Acts
A. The Respondent's Position
B. The Claimant's Position
C. The Tribunal's Analysis
i. The Legal Standard
ii. Whether Argentina has Demonstrated a State of Necessity
VII. QUANTUM
1. The Legal Standard
A. The Claimant's Position
B. The Respondent's Position
C. The Tribunal's Analysis
2. Valuation as of the Date of the Award
A. The Claimant's Position
B. The Respondent's Position
C. The Tribunal's Analysis
3. Burden of Proof and Causation
A. The Claimant's Position
B. The Respondent's Position
C. The Tribunal's Analysis
i. Burden of proof
ii. Causation
a. Windfall Profits
b. The Effect of the Measures
c. Sufficient Causal Link
4. Limitation to Compensation
A. The Respondent's Position
B. The Claimant's Position
C. The Tribunal's Analysis
5. Criticism of Damages Quantification
A. Measures Affecting Dispatch and Prices
i. The Claimant's Position
ii. The Respondent's Position
iii. The Tribunal's Analysis
a. The Claimant has not Sustained Damages, on the Contrary it has Benefitted
b. The Claimant Maintained and Expanded its Investment, its Damage is a Speculative Construct
c. The 2003 Valuation Model
d. Stated Goals
e. Whether the Claimant's Valuation Model is Reasonable
B. Measures Affecting Withheld Revenues
i. The Claimant's Position
ii. The Respondent's Position
iii. The Tribunal's Analysis
C. Update Factor for Passage of Time/Interest
i. The Claimant's Position
ii. The Respondent's Position
iii. The Tribunal's Analysis
a. Interest Rate
b. The Suspension Period
c. Compound vs. Simple
VIII. COSTS
1. The Claimant's Costs Submissions
2. The Respondent's Costs Submissions
3. The Tribunal's Decision on Costs
IX. AWARD

I. INTRODUCTION AND PARTIES

1. This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ("ICSID") on the basis of the Treaty Between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment of 14 November 1991, which entered into force on 20 October 1994 ("the Treaty" or "the US-Argentina BIT").

2. The Claimant is AES Corporation ("AES" or "the Claimant"), founded in 1981, incorporated in Delaware and headquartered in Arlington, Virginia in the United States.

3. The Respondent is The Argentine Republic ("Argentina" or "the Respondent".)

4. The Claimant and the Respondent are collectively referred to as "the parties". The parties' representatives and their addresses are listed above on page (i).

5. The dispute relates to a series of measures taken by the Respondent in the electricity sector in Argentina, beginning in 2002, and which in the Claimant's view breached a series of obligations under the US-Argentina BIT.

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III. FACTUAL AND LEGAL BACKGROUND OF THE DISPUTE

46. As is fairly well known, the modern history of the electricity sector in Argentina has been examined by several international investment tribunals. In the summary below the Tribunal presents a general overview of the facts surrounding the present dispute and, when appropriate, refers to descriptions and findings expressed by those tribunals which in its view are pertinent. The Tribunal also adopts as its own a number of factual descriptions and findings which in its view are uncontested by the Parties.

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IX. AWARD

602. For the reasons stated in the Award, the Tribunal decides as follows:

i. Dismisses the Respondent's allegations on the inadmissibility of the claim due to the Claimant's alleged waivers, consent to the agreements and schemes, the principle of estoppel and the doctrine of abuse of rights.

ii. Dismisses the Respondent's defense under Article XI of the Treaty.

iii. Determines that Argentina breached its obligations to accord FET under Article II.2.a) of the Treaty through the measures affecting spot price formation and dispatch (i.e., establishing a spot price cap and excluding fuels other than natural gas to determine the spot price); capacity payments; withholding of receivables and investment programs (i.e., FONINVEMEM I, FONINVEMEM II and III); as well as the cost-plus system and PPAs prohibition.

iv. Dismisses Claimant's allegation on FPS under Article II.2.a) of the Treaty.

v. Exercises judicial economy on Claimant's allegation of minimum standard of treatment under customary international law.

vi. Determines that Argentina breached its obligations not to impair the management and operation of Claimant's investment under Article II.2.b) of the Treaty through the implementation of its measures affecting spot price formation and dispatch; the cumulative effect of the measures affecting capacity payments and spot price formation; and the cost-plus system and PPAs prohibition.

vii. Determines that Argentina breached its obligations not to impair the management, operation, maintenance, use and enjoyment of Claimant's investments under Article II.2.b) of the Treaty through the withholding of revenues and the implementation of FONINVEMEM I, II and III.

viii. Dismisses Argentina's defense under Article 25 of the Articles on Responsibility of States for Internationally Wrongful Acts.

ix. As a result of Respondent's breaches, Argentina shall pay to the Claimant damages as of 31 December 2020 amounting to: US$715.9 million
- Measures affecting Dispatch and Prices: US$312.9 million
- Measures Affecting Withheld Revenues: US$403 million

x. The Respondent shall bear all the arbitration costs. 774 Additionally, the Respondent shall pay 80% of the legal fees and expenses incurred by the Claimant (US$19,996,453.10), with the exclusion of those incurred during the suspension period (US$236,509), in the amount of US$15,807,955.3.

xi. The Respondent shall pay to the Claimant simple interest on the damages and all other costs, including during the suspension period, at a 1-year US Treasury Bills rate. Such interest shall run from 31 December 2020 through the date of payment.

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