## Facts

- Argentina awarded Siemens’ Argentine subsidiary (SITS) a concession to design and implement an integrated migration control and identification system, approved by presidential decree in 1998.
- The concession contemplated an initial engineering phase and a later implementation phase, with an initial six-year term and renewals; Siemens posted a performance bond of about USD 20 million.
- Before and after a change of government, Argentina repeatedly suspended performance, sought renegotiations, and proposed revised terms that Siemens considered materially less favorable.
- In May 2001, Argentina terminated the concession by decree, citing fiscal and emergency-related reasons; Siemens alleged the termination was politically motivated, lacked a genuine public purpose, and was carried out in bad faith.
- Siemens commenced ICSID arbitration under the Germany–Argentina BIT, seeking compensation for alleged contract non-performance, retention of the performance bond, and loss of the investment’s value.

## Issues

1. Whether the tribunal had jurisdiction when Siemens invoked the BIT’s MFN clause to avoid an 18-month requirement to litigate in local courts before arbitration.
2. Whether Argentina’s conduct breached the BIT’s umbrella clause by failing to observe obligations assumed toward the investment under the concession.
3. Whether the termination decree and related conduct constituted indirect expropriation of Siemens’ investment.
4. Whether Argentina violated fair and equitable treatment, full protection and security, and the prohibition on arbitrary or discriminatory impairment.
5. Whether Argentina’s crisis-related defenses (including necessity) excused the challenged measures.
6. What compensation methodology and quantum were appropriate given the project’s suspension and early termination.

## Decision

- The tribunal upheld ICSID jurisdiction, accepting that the MFN clause permitted reliance on more favorable dispute-settlement terms from other Argentine treaties, thereby excusing the 18-month local-courts requirement.
- On the merits, the tribunal found Argentina liable for multiple BIT breaches, including:
  - breach of the umbrella clause based on failures connected to the concession and associated obligations;
  - indirect expropriation through termination of the concession and substantial deprivation of investment value;
  - breach of fair and equitable treatment and full protection and security; and
  - arbitrary and discriminatory impairment of the investment.
- The tribunal rejected Argentina’s necessity-based defense on the facts presented.
- The tribunal awarded Siemens approximately USD 237.8 million, plus interest, applying a valuation approach that emphasized incurred value rather than speculative future profits.

## Legal Principles

- An MFN clause may extend to dispute-settlement arrangements when its text and purpose support “no less favorable” procedural treatment compared to investors from third states.
- An umbrella clause can internationalize certain state obligations toward an investment, allowing treaty responsibility for conduct that also constitutes contractual non-performance.
- Indirect expropriation may arise from a single sovereign act (including a decree terminating a concession) if it substantially deprives the investor of the investment’s value, including protected contractual rights.
- Fair and equitable treatment requires a stable and predictable framework and prohibits conduct that defeats legitimate expectations created by state commitments, including formal approvals and contractual guarantees.
- Arbitrary or discriminatory state measures that impair an investment violate treaty protections even when framed as administrative or fiscal decisions.
- A necessity defense requires a close connection between the emergency and the specific measure and does not excuse actions that exceed what is justified in the circumstances.
- Compensation in treaty breach cases must aim at full reparation and may rely on non-DCF valuation where future profits are uncertain; interest may be structured to make the claimant whole.

## Conclusion

The tribunal confirmed jurisdiction by permitting MFN-based access to more favorable arbitration conditions and held Argentina internationally responsible under the Germany–Argentina BIT for terminating the concession and related conduct, characterizing the measures as indirect expropriation and violations of FET, security, and the umbrella clause, and awarding Siemens substantial monetary compensation plus interest.


Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/02/8 (Award Feb. 6, 2007)