Further analysis:

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In accordance with a guaranteed regulatory framework, Argentina had committed to calculating transportation tariffs in US dollars and expressed in pesos at the exchange rate at the time of billing. Consequently, TGN and other gas transportation companies were forced to pay gas transportation tariffs in devalued pesos, at an artificial rate of one-to-one with the US dollar.

These policies had a severe impact on TGN's earnings. Argentina's objections included the following contentions: Insofar as customary international law had taken a different approach, it should be seen as the exception.

Article 25 2 bwhich referenced foreign control, was designed to enlarge, not limit jurisdiction under the ICSID Convention. Foreign investments did not need to be direct; rather, the dispute in question must have arisen directly out of a foreign investment. The fact that the disputes may have arisen out of measures taken at different times or by different sources was not dispositive of their status as measures arising out of the same subject-matter.

Consequently, the decision held wide persuasive value for ICSID arbitrations and, in particular, for subsequent cases arising out of the Argentine financial crisis. Although it stated that the Barcelona Traction case was not relevant to the present dispute, the Tribunal said that the decision in ELSI showed that, under modern customary international law, shareholders may have been protected under the state of their nationality, regardless of the nationality of the corporation, because many commentators considered that states were considered to be protecting the interests of the individual under the law of diplomatic protection.

The Tribunal also made a unique contribution to the jurisprudence on fork in the road clauses by pronouncing that a legal action of a reactive or defensive nature could not trigger the fork in the road clause.

For one, the Tribunal's narrow view of the application of the fork in the road clause effectively allowed multiple proceedings to arise out of the same dispute, as a shareholder investor could bring a claim to the ICSID while the corporation simultaneously claimed in local courts.

The Tribunal expressly acknowledged this possibility in its decision. To access full citation information for this document, see the Oxford Law Citator record. The request concerns the alleged suspension by Argentina of a tariff adjustment formula for gas transportation applicable to an enterprise in which CMS has an investment. On August 23,CMS confirmed that it had taken no such steps. On this same date, the Secretary-General, in accordance with Institution Rule 7notified the parties of the registration of the request and invited them to proceed to constitute an Arbitral Tribunal as soon as possible.

On August 30,the Centre reminded Argentina of the Claimant's proposal concerning the number of arbitrators and the method of their appointment. Under this proposal, contained in paragraph 60 of the request for arbitration, the Arbitral Tribunal would consist of three arbitrators, one arbitrator to be appointed by each party and the third, who would be President of the Tribunal, to be appointed by agreement of the parties. On September 13,Argentina informed the Centre of its agreement to the proposal of CMS concerning the number of arbitrators and the method of their appointment.

On the same date the Centre informed the parties that since their agreement on the number of arbitrators and method of their appointment was equivalent to the formula set forth in Article 37 2 b of the Conventionthe parties were invited to follow the procedure set forth in Arbitration Rule 3 for the appointment of arbitrators.

The parties, however, failed to agree on the appointment of the third, presiding, arbitrator. In these circumstances, by letter of December 5,the Claimant requested that the third, presiding, arbitrator be appointed in accordance with Article 38 of the ICSID Convention. On January 11,the Secretary-General, in accordance with Rule 6 1 of the ICSID Rules of Procedure for Arbitration Proceedings Arbitration Rules notified the parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date.

At the session the parties expressed their agreement that the Tribunal had been properly constituted in accordance with the relevant provisions of the ICSID Convention and Arbitration Rules and that they did not have any objections in this respect. During the course of the first session the parties agreed on a number of procedural matters reflected in written minutes signed by the President and the Secretary of the Tribunal.

The Tribunal, after ascertaining the views of the parties on this matter, fixed the following time limits for the written phase of the proceedings: The Claimant would file a memorial within days from the date of the first session; the Respondent would file a counter-memorial within days of its receipt of the Claimant's memorial; the Claimant would file a reply within 60 days from its receipt of the counter-memorial; and the respondent would file its rejoinder within 60 days of its receipt of the reply.

At the first session it was further agreed that in the event of the Respondent raising objections to jurisdiction, the following time limits would apply: On May 24,the Claimant requested an extension till July 5, of the time limited fixed for the fixing of its memorial.

On June 6,the Tribunal granted the extension thought by the Claimant. In doing so, the Tribunal noted that Argentina would be entitled to an equivalent extension if requested, of the time limit fixed for its counter-memorial.

On July 5,the Claimant filed its memorial on the merits and accompanying documentation. On August 5,Mrs. Alejandro Escobar as Secretary of the Tribunal.

On September 4,Argentina requested an extension till October 7,of the time limit fixed for filing of the memorial on jurisdiction. On September 11,the Tribunal granted the extension sought by Argentina. On October 7,Argentina filed its memorial on jurisdiction. On October 24,following the Respondent's filing of objections to jurisdiction, the proceeding on the merits was suspended in accordance with ICSID Arbitration Rule 41 3.

On December 17,the Claimant submitted its counter-memorial on jurisdiction. On January 22,the parties requested an extension of 30 days for each of the remaining two jurisdictional filings. On January 27,the Tribunal granted the extensions, and fixed the time limit for the filing of the Respondents reply on jurisdiction for February 11, ; and the time limit for the filing of the Claimant's rejoinder on jurisdiction for March 25, On February 13,the Respondent filed its reply on jurisdiction, and on March 25,the Claimant filed its rejoinder on jurisdiction.

On April 7—8,the hearing on jurisdiction was held at the seat of the Centre in Washington, D. Lucy Reed and Messrs. Ignacio Suarez Anzorena addressed the Tribunal on behalf of Argentina. The Tribunal posed questions to the parties, as provided in Rule 32 3 of the Arbitration Rules. The Tribunal has deliberated and considered thoroughly the parties' written submissions on the question of jurisdiction and the oral arguments delivered in the course of the April 7—8, hearing.

As mentioned above, the consideration of the merits has been postponed until the issue of the Centre's jurisdiction and the Tribunal's competence has been decided by the Tribunal.

BITas well as the written and oral arguments of the parties' representatives, the Tribunal has reached the following decision on the question of jurisdiction. Beginning inthe Republic of Argentina undertook a broad program of privatization of State-owned companies and other activities, 3 while at the same time it proceeded to peg the Argentine peso to the United States dollar and adopted other stabilization measures. One major sector subject to privatization was the gas industry.

The Gas Law5 the Gas Decree6 the Information Memorandum, 7 the Model License 8 and other instruments were prepared and enacted in order to undertake the reorganization of this important sector of the economy. Within this overall legal framework, Transportadora de Gas del Norte TGNan Argentine incorporated company, obtained in a license for the transportation of gas while blocks of State-owned shares in the company were sold to private investors.

Under the arrangements made for the privatization of this sector, tariffs were to be calculated in U. Following a major economic and financial crisis, the Republic of Argentina enacted, starting latevarious measures which had, in the Claimant's view, an adverse impact on its business and breached the guarantees which protected its investment in TGN. These measures later led to the devaluation of the currency and the adoption of additional financial and administrative measures also alleged to have an adverse impact on the investor.

The Republic of Argentina does not share those views and believes the measures adopted have a meaning and extent different from what CMS claims. Moreover, the Republic of Argentina explains that many of these measures are transitory in nature, are currently being subject to renegotiation with investors in the privatization program and do not entail an expropriation of the investment made.

The only guarantees made to CMS by the Republic of Argentina, it is further affirmed, were those established in the Terms of the License and these have not been breached. The discussion which follows relates of course only to the issues and facts pertinent to this particular case. Both in the written pleadings and in the hearing, the Republic of Argentina raised, in connection with questions of admissibility, the concern that part of the claim by CMS is not related specifically to the gas industry but to measures of general economic policy affecting the country as a whole.

The latter measures, it is further explained, are mainly those connected with the situation of economic, financial and social emergency which arose in late and early and which led to the adoption of changes in the exchange and monetary policy then in effect.

The new legislation also mandated the restructuring and renegotiation of public and private contracts made in foreign currency, extinguished the right of the licensees in the regulated public sector to link tariffs to U. The Claimant believes that all such measures are not separate and distinct from the original dispute and form a single continuum.

According to the Claimant, the aggregate of measures has significantly affected the value of its investment, a view which is disputed by the Republic of Argentina. Although a good part of the views of the parties relating to those earlier measures and to others which followed has much to do with the merits of the case, the Tribunal believes that it is necessary to establish at the outset a clear distinction between measures of a general economic nature, particularly in the context of the economic and financial emergency discussed above, and measures specifically directed to the investment's operation.

The ICSID Convention and the jurisdiction of the tribunal established under it were conceived as a system of adjudication of legal disputes arising directly out of an investment, a premise that is specifically included in Article 25 1 of that Convention. This definition excludes quite clearly two kinds of disputes. First, it excludes nonlegal questions and, second, it excludes disputes that do not arise directly out of the investment concerned.

It follows that, in this context, questions of general economic policy not directly related to the investment, as opposed to measures specifically addressed to the operations of the business concerned, will normally fall outside the jurisdiction of the Centre. A direct relationship can, however, be established if those general measures are adopted in violation of specific commitments given to the investor in treaties, legislation or contracts.

What is brought under the jurisdiction of the Centre is not the general measures in themselves but the extent to which they may violate those specific commitments. The question is certainly not new in international law.

The right of the host State to adopt its economic policies together with the rights of investors under a system of guarantees and protection are at the very heart of this difficult balance, a balance which the Convention was careful to preserve. They do provide for standards of fair and equitable treatment, non-discrimination, guarantees in respect of expropriation and other matters, but they cannot prevent a country from pursuing its own economic choices. These choices are not under the Centre's jurisdiction and ICSID tribunals cannot pass judgment on whether such polices are right or wrong.

Judgment cannot only be made in respect of whether the rights of investors have been violated. The parties in this case appear not to disagree with this reasoning. The Republic of Argentina, in arguing about the difference between what it considers to be two separate kinds of disputes, emphasizes that general measures of public economic emergency are not directed towards investors but affect the country and its population as a whole.

At the oral hearing held in this case, Counsel for the Claimant, when referring to this distinction between general and specific measures also stated that: In the statements and decisions noted the Claimant separates the general measures of economic policy, with specific reference to devaluation, from the material impact they might have had on its investment in light of the treaty, legislation and contracts.

On the basis of the above considerations the Tribunal concludes on this point that it does not have jurisdiction over measures of general economic policy adopted by the Republic of Argentina and cannot pass judgment on whether they are right or wrong.

The Tribunal also concludes, however, that it has jurisdiction to examine whether specific measures affecting the Claimant's investment or measures of general economic policy having a direct bearing on such investment have been adopted in violation of legally binding commitments made to the investor in treaties, legislation or contracts.

While conceptually the line between one and the other matter is clear, in practice whether a given claim falls under one or the other heading can only be established in light of the evidence which the parties will produce and address in connection with the merits phase of the case. For the time being, the fact that the Claimant has demonstrated prima facie that it has been adversely affected by measures adopted by the Republic of Argentina is sufficient for the Tribunal to consider that the claim, as far as this matter is concerned, is admissible and that it has jurisdiction to examine it on the merits.

The Republic of Argentina has objected to the admissibility of the claim by CMS on the ground that the Claimant does not hold the rights upon which it bases its claim — to wit, TGN being the licensee, and CMS only a minority shareholder in this company, only TGN could claim for any damage suffered.

It is further argued that, since TGN is an Argentine company, it does not qualify as a foreign investor under the BIT nor is the License a foreign investment. It follows, in the Respondent's view, that CMS is claiming not for direct damages but for indirect damages which could result from its minority participation in TGN. The Republic of Argentina has also advanced the view that, in addition, CMS cannot claim for its proportional share in TGN, as this would imply that the shareholders have a standing different from that of the company.

If TGN arrives at an agreement with the Republic of Argentina, it is further stated, CMS could only oppose such arrangement as an intra-corporate question and not as the holder of an independent right of action. The Respondent explains that the only guarantee the Republic of Argentina gave to CMS related to the legal quality of the shares which were transferred to the Claimant by the Republic of Argentina in the context of the privatization process.

Should that legal quality be proven defective, CMS would have jus standi to claim for reparation, but this is not the case as the claim concerns the operation of the License and not the shares themselves. CMS has opposed such arguments on the premise that both the BIT and the whole process of investing in TGN was related to the privatization of the gas industry in Argentina, a process which was the subject of specific guarantees and commitments by the Republic of Argentina.

These guarantees included measures of legal stability and economic mechanisms aimed at ensuring the financial feasibility and the success of the investment, not just the question of the quality of the shares. In this regard, it is also explained, CMS is not claiming for rights pertaining to TGN but for the rights associated with its investment in the company. It is further stated that CMS qualifies as a foreign investor under the BIT and its participation as a shareholder is a foreign investment protected under that Treaty, thus having a right of action independently from TGN.

This right of action, it is argued, arises directly from the BIT provisions and it is independent from any contractual right of action that TGN might have under the License. International law and not any domestic law which might relate to contracts or other transactions governs such rights of claim, it is further stated.

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