Repsol and Argentina appoint arbitrators for their dispute: ICSID Case No. ARB/12/38 by Laura Lozano

Laura Lozano

Following the December AIA newsletter ( where I related that that Repsol, the Spanish oil and gas major, had filed an ICSID request for arbitration against the Argentine Republic; I can now announce that parties have now appointed two of the panel members.

The dispute arose out of the expropriation of the Repsol’s subsidiary –YPF- that took place last May. Argentina expropriated 51% in YPF and YPF Gas after accusing Repsol of insufficient investments in the country. Parties initially engaged in conversations during a 6 month cooling off period.  However, not having reached any settlement, Repsol filed a request for an ICSID arbitration proceeding under the “Agreement for the Reciprocal Promotion and Protection of Investments between the Kingdom of Spain and the Argentine Republic” (the Argentine-Spain Bilateral Investment Treaty (BIT) of 1991) last December 2012.

The parties had a 60 day period following the registration of the request of arbitration (18 December 2012) in which to reach an agreement for the constitution of the ICSID tribunal. Nonetheless, having failed to meet this deadline, ICSID Arbitration Rule 3 provides that the parties may invoke the default formula for a three member panel as set out in article 37 (2) (b) of the Convention. This article provides that each party names one arbitrator and then the two parties agree on the third arbitrator, who becomes the chairman of the tribunal. 

As the constitution of the tribunal is a key element for the parties' strategies, Repsol appointed Prof. Francisco Orrego as arbitrator, who served as the Chairman in the CMS Gas Transmission Company  vs   Argentina case where Argentina had to pay the Claimant compensation in the amount of US$133.2 million.[1]  Under ICSID Arbitration Rule 5, the parties must notify the Secretary General of the name and method of appointment of each arbitrator, and then the Secretary General asks the appointee if he or she accepts the appointment. Following the appointment by Repsol, Prof. Francisco Orrego Vicuña (Chilean) accepted his appointment as arbitrator last 6 March 2013.

In contrast, Prof. Brigitte Stern (French) accepted the respondent appointment last 25 March 2013. Interestingly, Prof. Stern has been one of the favorite  arbitrators to be named by States, having been appointed by them in 79% of her 39 involvement in ICSID tribunals.

Regarding the third name of the dispute, no official information has been provided up to today. However, rumors suggest that the Canadian Mr. Marc Lalonde could be the chairman of the proceeding. In that event, if past rulings are a guide, the prospects may not be optimistic for Argentina, as Mr. Lalonde not only was part of the tribunal of the CMS case where Argentina lost but also he has been appointed more times by investors than by states.

It is noteworthy that the request for arbitration includes a $10.500 million claim which is the highest claim that Argentina has received from ICSID. Nevertheless, Argentina has not paid any of the awards rendered against it due to the financial crisis that started in 1999 and let to its default in 2001. Indeed, last March 2012 the United States suspended Argentina’s trade benefits because of their failure to honour the ICSID awards. Nowadays it is said that Argentina is seriously considering withdrawal from ICSID and terminating its BITs. Time will tell how the investor state disputes in Argentina end…


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