Case presentation on Siemens vs. Argentina (ICSID,2007)

1. By: Pranshu Tripathi Ist Sem. LL.M (Trade and Investment Law)

2. Facts in Brief
 1996-Argentina called for bids for provision of
services related to immigration control,
personal identification and electoral
information systems.
 1998- Siemens (SITS) got successful and
entered into contract with Argentina.
 Duration of Contract- 6 years (extension
automatically renewable for two 3 years term)
 Payment was to paid for each national identity
card that Siemens produces.
 Prices under contract was denominated in
pesos.

3.  US $ 20 Million Performance bond was given
by Siemens.
 Aug 1999-Production scheduled, which was
postponed due to high demand of IDC’s.
 Oct 1999-Election in Argentina.
 10th Dec 1999- New government in
Argentina.
 1st Feb 2000- immigration control subsystem
commenced operation; stopped next day.
 24th Feb 2000- defects in IDC’s ( No
opportunity to rectify error)Suspension of
production

4.  Jan 2000-Govt to renegotiate contract.
 March 2000- Commission to review the
contract. Siemens also made proposals.
 Nov.2000-Agreement on a particular
proposal. Proposal sent to government and
returned with the consent showing that
parties in agreement on proposal.
 Nov.2000- Economic Financial Emergency
Law( President was empowered to
renegotiate public sector contracts. Siemens
never objected since was of view that would
speed up the approval of proposal of Nov
2000.

5.  19th Dec.2000-Siemens officials met
President who promised to issue a decree
approving the Proposal (Nov.2000).
 3rd May 2001- Siemens (SITS) received a
revived proposal which was different from
earlier proposal. Government made such
proposal not negotiable.
 18th May 2001-Contract terminated by Decree
699/01. SITS -Administrative appeal filed but
rejected. Approached ICSID.

6. Claims of Investor
Proceedings initiated under Treaty on the
Mutual Protection and Promotion of
Investments(Germany-Argentina Treaty,1991).
 Expropriation of investment.
 Violation of fair and equitable treatment.
 Violation of full protection and security.
 Arbitrary and discriminatory action.
 Breach of Umbrella Clause.

7.  Expropriation: Tribunal found that the use of
public authority while doing expropriation.
Tribunal also held that the Argentina acted in
its Police powers rather than as a contracting
party. Tribunal found it as the violation of the
whole treaty not just of the contract.
 Expropriation was unlawful since no public
purpose present and no compensation paid.

8.  Fair and Equitable Treatment: Treaty in Article
2(1) requires the investment to be treated fairly
and just manner. Since no minimum standard
set so tribunal looked into international law for
the definition.
 Argentina renegotiation was for the sole
purpose of reducing its costs not supported by
public interest.
 Lack of transparency
 Earlier while investment no inability shown that
negotiation cant be done with states, which is
violation of good faith principle and legitimate
expectation.

9.  Full protection and Security: Article 4(1)
BIT talks about full protection and
security.
 Siemens insisted on legal security rather
than physical security of investment.
 Tribunal accepted this approach and
held full protection and security extends
to legal security.

10.  Arbitrariness and Discrimination:
 No reason cited for actions (when the
immigration subsystem started functioning
why it was stopped requiring authorization).
 No opportunity to rectify the error in IDC’s:
without any reason and production was
suspended.
 Tribunal held that the provisional
suspension on reasoned ground could be
accepted but permanent suspension
without any reason arbitrary.

11.  Breach of Umbrella Clause:
 Violation not just contractual.
 Law has been changed.
 State has only authority to change laws
not private entity.
 Actions directly traceable to the actions
of Argentinean Government.

12.  Damages:
 Law applied: Treaty provided for the damages
when expropriation is done. It did not provided
for unlawful expropriation. Thus Tribunal,
applied customary international law as
reflected in Chorzow Factory indemnity case.
 Standard of compensation: Treaty provided
compensation only when lawful expropriation.
Argentina contended that the value of
expropriated investment excludes future
profits.
 Tribunal held that full value of investment has
to be paid in compensation.

13.  Date for establishing value: At the time
of Award.
 Method of Valuation: Book Value
method( sums invested by Siemens and
evidenced in financial statements).
 Siemens Claimed US$462,477,071+ CI
6%.
 Tribunal ordered to indemnify by
US$217,838,439+ Return of PB +claims
of subcontractors.

14.  Impact of Corruption: Officials of
Siemens engaged in bribing Argentinean
officials. Argentina asked for review of
award. This request was settled by
Siemens abandoning its claim awarded
by tribunal.

15. THANK YOU