## Facts

- CMS Gas Transmission Company, a U.S. investor, held an indirect minority shareholding (about 29.42%) in Transportadora de Gas del Norte (TGN), an Argentine gas transportation company formed during Argentina’s 1990s privatization.
- Argentina’s regulatory framework for gas transportation included tariffs denominated in U.S. dollars, indexation to the U.S. Producer Price Index, and assurances of tariff stability in licenses and legislation.
- During the 2001–2002 economic crisis, Argentina adopted emergency measures that ended dollar–peso convertibility, converted dollar-based arrangements into pesos, and froze or altered public-utility tariffs affecting TGN.
- CMS initiated ICSID arbitration under the U.S.–Argentina bilateral investment treaty (BIT), alleging treaty breaches including denial of fair and equitable treatment (FET), expropriation, an umbrella-clause breach, and unlawful impairment of the investment.
- In 2005, the tribunal found Argentina liable for breaching FET and the umbrella clause, rejected expropriation, rejected defenses based on the BIT’s essential security clause and customary necessity, and awarded approximately USD 133.2 million plus interest.
- Argentina sought annulment under ICSID Convention Article 52, asserting manifest excess of powers, serious procedural departure, and failure to state reasons; the 2007 decision addressed only these limited annulment grounds rather than re-deciding the merits.

## Issues

1. Whether the award should be annulled for manifest excess of powers based on alleged misinterpretation or misapplication of the BIT’s essential security clause, customary necessity, the umbrella clause, and jurisdiction over an indirect minority shareholder.
2. Whether the award failed to state reasons, including for its treatment of the relationship between the BIT’s essential security clause and customary necessity, and for its umbrella-clause analysis.
3. Whether the tribunal seriously departed from a fundamental rule of procedure by allegedly failing to address key arguments or evidence.
4. If partial annulment were warranted, whether the damages determination had to be revised or could stand on the remaining basis of liability.

## Decision

- The ad hoc committee partially annulled the award.
- The committee annulled the finding of liability insofar as it relied on the BIT’s umbrella clause, holding that the tribunal failed to state reasons on that point.
- The committee declined to annul the FET breach finding, holding that alleged legal or factual errors did not meet the Article 52 thresholds.
- The committee declined to annul the rejection of Argentina’s defenses under the BIT’s essential security clause and customary necessity, despite criticizing aspects of the tribunal’s legal analysis.
- The committee upheld the tribunal’s jurisdiction, including over CMS’s indirect minority shareholding as an “investment” under the BIT and the ICSID Convention.
- The committee left the damages award largely intact, concluding that the compensation could be sustained on the remaining FET breach and that the award did not require recalculation.

## Legal Principles

- ICSID annulment under Article 52 is limited and is not a mechanism to re-litigate the merits; an ad hoc committee does not correct mere errors of law or fact.
- “Failure to state reasons” is established when reasoning is so deficient (e.g., contradictory or with a decisive logical gap) that the reader cannot follow how the tribunal reached its conclusion; terse or disputable reasoning is insufficient if a coherent rationale is still discernible.
- A tribunal’s potentially flawed treatment of defenses (including essential security clauses and customary necessity) does not justify annulment unless it amounts to a manifest excess of powers, a true failure to give reasons, or another enumerated Article 52 defect.
- Interpretation of the treaty’s definition of “investment” and the scope of the tribunal’s jurisdiction is within the tribunal’s competence; annulment requires a clear Article 52 ground, not disagreement with the tribunal’s interpretive outcome.
- Where a partially annulled ground of liability does not drive a separable damages calculation, the monetary award may remain enforceable if supported by surviving liability findings.

## Conclusion

The annulment committee set aside only the umbrella-clause component of liability for failure to state reasons, while preserving the core outcome that Argentina breached FET and owed compensation, emphasizing the narrow function of Article 52 review and declining to treat annulment as an appeal.


CMS Gas Transmission Co. v. Argentine Republic, ICSID Case No. ARB/01/8 (Annulment Decision Sept. 25, 2007)