Compensation quantified in LG&E v Argentina

In its award of October 2006, the ICSID tribunal in LG&E v Argentina determined that Argentina had breached BIT obligations relating to fair and equitable treatment and non-discrimination, as well as the BIT umbrella clause. The breaches arose out of Argentina's dismantling, during the financial crisis in that country, of specific guarantees to investors forming part of the gas regulatory framework. The tribunal determined, however, that for the period of the crisis itself, a defence of necessity applied.

The tribunal has now published its award on quantum. The claimants sought compensation based upon the fair market value of their investment, a measure which was not opposed in principle by Argentina. The tribunal held that the fair market value was an appropriate measure for cases of expropriation (where an investment, or title in it, is totally destroyed) but not here, where the claimants had maintained their investment and the value of shares had actually "rebounded" since the crisis. Instead, the proper measure was the reduction in dividends attributable to the breaches. Claims for future loss were rejected as being too speculative, and no damages were awarded in respect of the period of necessity. Ultimately, the claimants were awarded US$57.4m (including compound interest).

Case: LG&E v. Argentina, ICSID Case No. ARB/02/1