Argentine politicians have been quick to condemn the CMS decision. Economy minister Roberto Lavagna, speaking to the BBC, called the award an “absurdity” and expressed incredulity that an international tribunal could enjoy “the right to decide the economic policy that Argentina will pursue”.

Harsh words notwithstanding, an ICSID arbitration award enjoys the imprimateur of the World Bank and, as such, can be a rather hard form of currency. Since the ICSID began arbitrating disputes between foreign investors and governments in the 1970s, no country has refused to pay an arbitral award once it had been finalised.


There are avenues available for challenging these awards on narrow procedural grounds and Argentina has signalled that it will take them. At the very least, this could buy it another year or more before it would have to write a cheque to CMS. But if it fails to overturn the award, it could soon be in uncharted legal waters.

Under the ICSID Convention, foreign investors are able to take final ICSID awards to domestic courts to seek payment; the courts are obliged to accord these awards the same finality as would be shown to decisions of that country’s highest court.

However, Argentina’s former justice minister Horacio Rosatti (who stepped down from his post in July) had long floated the view that the ICSID Convention – which ensures the enforceability of ICSID arbitral awards – cannot be higher than Argentina’s constitution. Mr Rosatti argued that any ICSID arbitral decisions can be reviewed in Argentina’s courts to ensure their compatibility with the country’s constitution.

The prospect that Argentina’s highest court could have the last word in such matters seems to illicit a uniform response from international lawyers suing Argentina: they insist that arbitral decisions are binding on Argentina as a matter of international law, regardless of what the domestic courts have to say.

Carlos Alfaro, an Argentine lawyer practising in New York City and Buenos Aires, thinks that Argentina may be in no hurry to test out Mr Rosatti’s constitutional theories about ICSID awards. By Mr Alfaro’s reckoning, Argentina appears determined to drag out enforcement of any unfavourable awards for as long as possible, to pressure foreign investors into settling their cases. He speculates that Argentina will wait until CMS applies to an Argentine court for enforcement of the award before mounting its long-threatened constitutional challenge, a process that could take another one to two years to complete.

Economy rebounds

Mr Alfaro, who also serves as chairman of the US-Argentine Chamber of Commerce, stresses that there is money to be made in Argentina now that the economy is rebounding. He adds that foreign investors who see a brighter future in Argentina may seek to settle with the government and reach new contractual terms, rather than engage in scorched-earth legal battles. Already, he says, several Spanish companies (with some nudging from the Spanish government) are considering abandoning their arbitrations against Argentina.

Other foreign companies may have lost interest in negotiating new contractual terms – for example, those that sold off their investments at a steep discount in the aftermath of the financial crisis. A general counsel with one US-based energy firm rattled off the names of half a dozen companies which sold off their Argentine investments – for an average of 10 cents on the dollar – and which are now banking on their arbitral claims as a means of recouping some of those losses.

In the aftermath of the CMS ruling foreign investors may be more optimistic about their chances for a pay-day, but international arbitration is never a sure bet. One concern for foreign investors is that the decentralised nature of investment arbitration – with each case delegated to a separate tribunal set up by the parties – could generate contradictory rulings, particularly with so many cases now moving along in parallel.

In the short history of investment treaty arbitration, in at least one case two tribunals have looked at the same dispute and reached opposite conclusions on a government’s liability under its investment treaties. US businessman Ronald Lauder and his company Central European Media Enterprises both filed claims against the Czech Republic, in 1999 and 2000 respectively, following a high-profile broadcasting dispute with Czech media regulators. In 2001, two tribunals handed down conflicting decisions within 10 days of one another in 2001, to the chagrin of many international lawyers – and to the dismay of governments obliged to live up to the sometimes vague terms of these treaties.

Potential chaos

Since then, numerous conferences and symposia have wrestled with this potential Achilles’ heel in the investment treaty arbitration system. French law professor Brigette Stern, herself an arbitrator in several Argentina cases, told American Lawyer magazine that, with so many disputes running in tandem, “you have the potential for 20 arbitrations, one problem and 20 solutions”.

Another concern for foreign investors is that even a string of unbroken rulings in their favour could be blocked in the Argentine courts, and frustrated in other legal jurisdictions, where investors might try to enforce the awards and seize foreign assets held by the Argentine state.

One lawyer (who did not want to be named because he has arbitration claims still pending against the country) says: “[Argentina] is an international rogue if it does not automatically enforce these decisions.”

Whether or not the country is painted as a rogue or as a victim may yet be determined. Argentina is reportedly interviewing foreign law firms to assist with its legal defence – something observers view as long overdue – and is crafting a more proactive publicity strategy to communicate its message to the international business community.

One lawyer litigating against Argentina says that investment protection treaties were designed to ensure that governments cannot change “the rules of the game one quarter of the way into the match”. Only one thing appears certain at this stage: this match is still far from over.