International dispute settlement--investment arbitration---fair and equitable treatment-corporations as subjects of international law--human right to water and sanitation--rights and obligations of investors
URBASER S.A. AND CONSORCIO DE AGUAS BILBAO BIZKAIA, BILBAO BISKAIA UR PARTZUERGOA v. THE ARGENTINE REPUBLIC, ICSID Case No. ARB/07/26. At https://icsid.worldbank.org/en. International Center for the Settlement of Disputes, December 8, 2016.
On December 8, 2016, an International Centre for Settlement of Investment Disputes (ICSID) tribunal (the Tribunal) held that international human rights condition the treatment that an investor is entitled to receive from a state and that human rights impose obligations on the investor itself. (1) The Tribunal's explicit recognition of these dual consequences of international human rights law breaks new ground. International investment tribunals have not previously held that human rights obligations have any effect on protections due to investors, much less that international human rights law might establish separate obligations for investors.
The case, Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Urbaser) arose out of a concession for water and sewage services for the Province of Greater Buenos Aires granted by Argentina in early 2000 to Aguas Del Gran Buenos Aires, S.A. (AGBA), a company established by the Spanish corporations Urbaser and Consorcio de Aguas Bilbao Bizkaia (collectively, Urbaser) (para. 34). A primary purpose of the concession was the "imperative need to expand the drinking water and sewage services" to the impoverished province (paras. 68-69).
The concession soon ran into problems. By mid-2001, Argentina was in the throes of a financial crisis, prompting a series of emergency measures, including "pesification"--the 1:1 conversion of obligations from U.S.
dollars into Argentine Pesos while allowing the peso to depreciate dramatically in value (para. 34). At the same time, Argentina's compliance with its safety and health duties deteriorated, eventually leading to a "critical sanitary situation" (para. 71), the result of pervasive poverty, widespread unemployment, and insufficient food and water (para. 74).
Argentina ultimately terminated Urbaser's concession in July 2006. One year later, in July 2007, Urbaser initiated an ICSID arbitration pursuant to the Spain-Argentina Bilateral Investment Treaty (BIT) (para. 34). Urbaser alleged that, in an effort to attract foreign capital, Argentina had established a regulatory framework designed to provide security to investors, including mechanisms to ensure tariffs would be set to adequate levels, even in the event of a monetary crisis (para. 561). According to Urbaser, Argentina adopted measures that negatively impacted the investment, including the pesification of tariffs, which destroyed "any chance of obtaining the reasonably expected results" (paras. 562-63). Urbaser alleged that these measures violated the BIT's fair and equitable treatment, expropriation, and discriminatory and unjustified treatment provisions (para. 34). Argentina counterclaimed that Urbaser failed "to provide the necessary investment into the Concession, thus violating its commitments and its obligations under international law based on the human right to water" (para. 36).
The Tribunal addressed Urbaser's claims first. It held that the fair and equitable treatment requirement in this BIT protects the investor's legitimate expectations, which are informed by the host state's constitutional and international legal obligations, as well as the social and economic environment at the time the investment was made (paras. 620, 623). The Tribunal concluded that "[t]he protection of [the] universal basic human right [to water] constitutes the framework within which Claimants should frame their expectations" (para. 624). It also found that Urbaser was aware of Argentina's obligations regarding the right to water (paras. 720-23).
The Tribunal attributed the concession's problems to sources other than Argentina (paras. 638, 672-82), and further concluded "that there existed a situation of necessity as sufficient support for [Argentina's] emergency measures..." (para. 718). The Tribunal went on to reject most of Urbaser's claims (paras. 1002, 1106, 1234(3)). It did, however, find that Argentina's lack of transparency in renegotiating the concession violated the BIT, although this breach produced no damages (paras. 845-47, 1234(2)).
The Tribunal next turned to Argentina's human rights counterclaims. After concluding that it had jurisdiction over these claims (paras. 1143-55), the Tribunal addressed whether investors are subjects of international law capable of holding international human rights obligations. In considering this question, the Tribunal reasoned that the BIT accorded rights to investors under international law and, correspondingly, the BIT admitted...