## Facts

- Enron Corporation (later Enron Creditors Recovery Corporation) and Ponderosa Assets, L.P. held indirect equity and related contractual interests in Transportadora de Gas del Sur (TGS), a privatized Argentine gas transportation company.
- Argentina’s gas privatization framework under the Gas Law included tariff features intended to attract foreign investment, including U.S.-dollar denomination and adjustment tied to the U.S. Producer Price Index (PPI), implemented through licenses and associated regulatory instruments.
- Claimants asserted they relied on the stability of this tariff regime when investing in TGS and structuring related technical and operational arrangements.
- Argentina experienced a severe economic and financial crisis beginning in 1998, with major social and economic disruption.
- In January 2002, Argentina enacted emergency measures, including legislation that ended peso–dollar convertibility, converted dollar-denominated tariffs and contracts into pesos, suspended PPI indexation, and froze utility tariffs.
- Claimants alleged these measures, along with certain provincial tax measures affecting TGS, substantially reduced investment value and violated protections in the 1991 U.S.–Argentina bilateral investment treaty (BIT).
- The arbitration was brought under the ICSID Convention; the request for arbitration was filed February 26, 2001, and the tribunal issued its merits award on May 22, 2007.

## Issues

1. Whether claimants’ indirect shareholdings and related contractual rights constituted a protected “investment” for purposes of ICSID jurisdiction and the BIT.
2. Whether Argentina’s emergency measures (including tariff pesification, tariff freeze, and elimination of PPI indexation) breached the BIT’s fair and equitable treatment (FET) obligation.
3. Whether Argentina’s alteration of the regulatory and license regime breached the BIT’s umbrella clause requiring the state to observe obligations entered into with respect to investments.
4. Whether Argentina’s measures were excused under the BIT’s security/necessity clause or under customary international law necessity.
5. What compensation, if any, was owed and how damages should be quantified.

## Decision

- The tribunal upheld jurisdiction over the dispute, treating the investment as including indirect equity participation and related contractual interests tied to TGS’s licensed operations.
- The tribunal found Argentina breached the BIT’s FET standard by fundamentally altering the tariff regime that had been presented as a central feature of the investment framework, including removal of dollar denomination, suspension of PPI indexation, and tariff freezing.
- The tribunal found Argentina breached the BIT’s umbrella clause by failing to observe obligations associated with the regulatory and license framework on which the investment relied.
- The tribunal rejected Argentina’s reliance on the BIT’s security/necessity clause and the customary international law necessity defense, concluding the strict conditions for necessity were not met.
- The tribunal awarded approximately USD 106.2 million in damages (substantially less than the amount claimed).

## Legal Principles

- An “investment” for jurisdictional purposes may include indirect shareholdings and associated contractual rights connected to a licensed, regulated enterprise, where the treaty definition is broad and the interests are tied to the investment operation.
- FET protects an investor’s legitimate expectations arising from specific features of the legal and regulatory framework that were relied upon when committing capital; a radical and sudden overhaul of core regulatory guarantees can violate FET.
- A state retains regulatory authority, including to respond to crisis conditions, but treaty compliance requires that measures not negate specific commitments that formed part of the investment’s risk allocation without adequate justification or adjustment consistent with treaty standards.
- An umbrella clause may be breached where the state fails to comply with obligations it has undertaken with respect to an investment, including commitments embedded in a license-based regulatory framework relied upon by the investor.
- Necessity defenses under treaty security clauses and customary international law require strict proof, including that the measures were the only way to safeguard an essential interest and that the state did not materially contribute to the situation giving rise to necessity.
- Damages may be assessed by comparing the investment’s value under the committed regulatory framework with its value under the post-measures framework, with appropriate adjustments for uncertainty and market conditions.

## Conclusion

The tribunal held Argentina liable under the U.S.–Argentina BIT for violating fair and equitable treatment and the umbrella clause through crisis-era measures that dismantled core tariff protections central to the investment, rejected necessity defenses, and awarded monetary compensation for the resulting loss in value.


Enron Corp. v. Argentine Republic, ICSID Case No. ARB/01/3 (Award May 22, 2007)