Argentina loses another case before the World Bank tribunal // It is accused of having expropriated Aguas Mendocinas without adequate compensation

La Nacion

Argentina loses another case before the World Bank tribunal



Wednesday, June 13, 2012



By Silvia Pisani



It is accused of having expropriated Aguas Mendocinas without adequate compensation



Argentina got an adverse ruling from the arbitration tribunal of the World Bank (ICSID) in the case opened over the nationalization of the water company of Mendoza, but the more disquieting fact is that the decision punishes the country for having “expropriated without adequate compensation in turn” for the investor company, Saur of France.



The decision, mentioning an “expropriation without counterpart”, sets a risky precedent in the face of the coming battle that the government will have to confront in this same tribunal from the claim being filed by the Spanish oil company, Repsol, over the nationalization of its 51% stake in YPF.



In the Saur case, which was the operator of Aguas Mendocinas, the tribunal headquartered in this city also set up a specific commission to determine the amount that Argentina will have to pay.



The initial claim was some US$200 million, but it’s possible that the amount will vary, according to sources familiar with the case.  “We are very satisfied with this decision which benefits our client,” said attorney Fernando Mantilla Serrano, who made up the team representing Saur, to LA NACION.



The dispute is based on the breaking of a contract and violation of the bilateral treaty on protecting investments between both countries.  In the case, the plaintiff said that, in the crisis of 2002, first they froze rates and then, with the passing of years, didn’t give agreed adjustments time. “It was a case of strangulation of the company.  First freeze the rates; then, don’t give them the adjustments they agreed to and, finally, reproach them for a lack of investment, intervene and nationalize,” the attorney said.



Complicated relations



The adverse ruling comes in the midst of a tense situation between Argentina and the ICSID after our country decided not to honor two rulings in favor of American companies for a joint amount of US$300 million, in a decision that was catalogued as an “unfair practice” by the American government.



In retaliation, the Obama administration canceled trade benefits for Argentine products and opposes the country seeking financing in multilateral organizations.



Argentina still has 17 cases open before the entity, and came to accumulate 42 after the 2001 crisis.  The ICSID is objected to by Venezuela and Ecuador, who consider it “too inclined” towards investors.



"Our government hasn’t thought of leaving the ICSID,” said Argentina’s ambassador to the U.S., Jorge Arguello.  But it was also Arguello who said on more than one occasion that there was “bad faith and bad information” on the behavior of Cristina Kirchner’s government in the tribunal.



In the Saur case, despite involving Obras Sanitarias de Mendoza, the case was filed more than seven years ago against the Argentine state.  In that time, the provincial government said it was sure it could show the “enormous irregularities” registered since the service had been privatized in 1998.