In a bid to staunch the crisis, Argentina slapped a freeze on the prices that utility companies could charge customers for basic services. This, coupled with the collapse of the Argentine peso, put many foreign investors in extreme financial peril.

In the aftermath of the crisis, foreign investors queued by the dozen to sue Argentina before international arbitration tribunals. Household names such as Telefonica, Suez, Exxon-Mobil, Total and BP all accused Argentina of breaching contractual and treaty promises which had enticed foreigners to sink billions into the Argentine economy during the 1990s.

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Most of these high-stake lawsuits are still ongoing, but the first case has now come to a close. Recently, a review panel at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) upheld a 2005 arbitration ruling which ordered Argentina to pay more than $160m to the US energy company, CMS.

Adding insult to financial injury for Argentina, the review panel conceded that the arbitrators who heard the dispute made serious legal errors – which may have robbed Argentina of a self-defence plea (one rooted in sheer economic necessity). However, the same review panel added that it was powerless to annul the erroneous ruling, given the very limited scope for judicial review of arbitration awards rendered by the ICSID.

Such a curious outcome has infuriated Argentina, at the same time as it has stoked debate among observers as to whether the World Bank arbitration body needs an overhaul – including perhaps an appeals court with greater powers to correct any mistakes by arbitrators acting under the Centre’s auspices.

CMS representatives acknowledge that the review panel’s sharply worded decision has stirred up a hornet’s nest, yet company representatives point to the legally binding nature of the original arbitration ruling. With the arbitration process at its end, they want Argentina to make good on a promise made in 2006 – when the review panel was still deliberating – that the government would pay any damages ordered.

But, some five months after the review panel’s work came to a close, the company still has not been paid. CMS says that government officials have urged the firm to pursue the matter in the Argentine courts – something which is unnecessary and even counter-productive according to international arbitration experts.

As the clock ticks, Ms Kirchner faces a tough choice: she can use the words of the ICSID’s own review panel as a political wedge, calling into question the integrity of a system which can oblige governments to pay hundreds of millions of dollars to foreign multinationals based on a legal mistake. Indeed, a backlash is stirring in other parts of South America, with Bolivia recently withdrawing from the ICSID system.

Or, Ms Kirchner can honour the words of the previous administration – that of her husband – and hope that any lawsuit losses are mitigated by a fresh flood of new foreign investments, including in Argentina’s struggling energy sector.

Luke Peterson is a journalist and research consultant based in New York City. He publishes an investigative news service, Investment Treaty News, for a Canadian think tank.

(www.investment-treatynews.com)