The cases of Suez, Sociedad General de Aguas de Barcelona S.A., and Vivendi Universal S.A. v. The Argentine Republic (“Suez et al. v. Argentina”) and AWG Group Limited v. The Argentine Republic (“AWG v. Argentina”) involved a single dispute arising in connection with a Buenos Aires water concession brought on by Argentina’s 2002 economic crisis. Among them, the four Claimants relied on Argentina’s bilateral investment treaties (“BITs”) with France, Spain and the United Kingdom. Suez et al. v. Argentina was an ICSID Convention proceeding. AWG v. Argentina was conducted under the 1976 UNCITRAL Arbitration Rules and administered by ICSID. The composition of the Arbitral Tribunal in each case was identical, and the Tribunal conducted the two proceedings in parallel. On April 9, 2015, the Tribunal rendered a single award for both cases, awarding compensation to Claimants in a total cumulative amount of US$404.5 million plus interest.



Claimants formed and held shares in Aguas Argentinas S.A. (“AASA”), an Argentine company. In 1993, AASA entered into a 30-year concession with the Argentine government for water distribution and waste water treatment in the city of Buenos Aires and certain surrounding municipalities.

Claimants would be compensated under the concession by the fees and tariffs paid to AASA by consumers. Suez was the concession operator. Claimants guaranteed loans made to AASA by three multilateral lending institutions: the Inter-American Development Bank, the International Finance Corporation, and the European Investment Bank.

In the early 2000s, as a result of the Argentine crisis, the Argentine government devalued the Argentine peso by ending its peg to the U.S. dollar and refused to revise the fees and tariffs charged by AASA. As a direct consequence, AASA was deprived of the revenue needed to meet its financial obligations, invest in the water distribution and waste management systems, and allow its investors to earn a reasonable return on their investment.

From 2003 onwards, Claimants, as guarantors of AASA’s debt, made total payments of US$297.7 million to the multilateral financial institutions. In 2006, the Argentine government terminated AASA’s concession. Shortly afterwards, AASA became subject to insolvency proceedings.

Procedural History

In 2003, Claimants filed a request for arbitration with ICSID alleging that Argentina’s actions amounted to an illegal expropriation of their investments, denied their investments full protection and security, and failed to afford them fair and equitable treatment. They claimed a total amount of US$1,019.2 million.

In 2010, the Tribunal rendered a Decision on Liability. It concluded that Argentina’s actions did not amount to an illegal expropriation of or a denial of full protection and security to Claimants’ investments. The Tribunal did find that Argentina had denied Claimants’ investments fair and equitable treatment.

The Tribunal then decided to open a separate procedural phase to determine the quantum of damages. In 2011, the Tribunal appointed Dr Akash Deep, Senior Lecturer at Harvard University’s John F. Kennedy School of Government, as independent Financial Expert.

The Legal Standard of Compensation

The Tribunal looked at customary international law to determine the applicable legal standard for calculating the loss caused to Claimants. It found that Argentina’s breaches of its international obligations required full reparation (restitution in integrum) for the injury caused. Claimants were to be placed “‘in the situation which would, in all probability, have existed’ if Argentina had not committed its illegal acts.” (Suez et al. v. Argentina and AWG v. Argentina, Award, 9 April 2015, paragraph 27).

The Application of the Principle of Full Compensation to the Facts

The Tribunal held that the valuation of damages in a case of denial of fair and equitable treatment required it to undertake a three-step process. First, it must determine the value of the investments in the hypothetical situation where Argentina did not take measures in violation of its international obligations (the “without-measures,” or counterfactual, scenario). Second, it must establish the value of the investment as a result of the offending measures (the “with-measures” scenario). Finally, compensation is the actualized difference of the valuations under both scenarios.

As a first preliminary issue, the Tribunal determined that the valuation period runs from the date of the first measure in breach of fair and equitable treatment to the originally expected end of the concession. This period extended from January 2002 until 2023. As a second preliminary issue, the Tribunal held that no issues of double recovery arose from the fact that AASA had a pending claim for damages under the concession before Argentine courts. Claimants had agreed to waive claims to any receivables obtained from local courts, and the Tribunal was certain that Argentina would bring any award of damages by the Tribunal to the attention of those courts. Any issue of double recovery would be for the local courts to decide.

In constructing the counterfactual “without measures” scenario, the Tribunal concluded that, fair and equitable treatment of the Claimants’ investment by Argentina would have fostered “cooperation” between the parties, in accordance with the general spirit and intent of the concession and the general principle of good faith. As a result, a new set of agreements between the parties would have ensured the continuation of the service. In the Tribunal’s view, the resulting agreements would have met the following requirements: i) to ensure the viability of the services and the concession; ii) to follow the basic spirit and intent of the original agreement and the parties’ practices; iii) to involve shared sacrifices from the parties; and iv) the agreements would be reasonably acceptable to the parties in a scenario of good faith cooperation between them (i.e., not of confrontation).

Dr. Deep postulated that, under the circumstances, reasonable parties would have agreed to the following measures: i) to raise tariffs at the rate of inflation from 2002 onwards; ii) to provide for immediate liquidity relief by the Argentine government to AASA in the form of an interest free loan or equivalent; iii) to adjust AASA’s capital expenditure plan; iv) to make a full review of the economics of the concession in 2003; v) to cover any shortfall in cash flow through capital infusions by AASA’s investors (i.e., Claimants); and vi) to waive payment of management fees. The Tribunal found that Dr. Deep’s measures were a “reasonable hypothesis of what a regulator, intent on fair and equitable treatment of AASA, would do in a comparable situation.” (Suez et al. v. Argentina and AWG v. Argentina, Award, 9 April 2015, paragraph 26).

The Tribunal agreed with Dr. Deep’s conclusion that the measures actually taken by Argentina resulted in a complete loss of Claimants’ investments. The amount to be subtracted from the hypothetical value of the investments was thus equal to zero.

Calculation of the Claimants’ Losses

Claimants asserted five individual elements of loss as a result of Argentina’s treaty violations, which are described in the subsections below: first, losses on AASA’s debts that Claimants had guaranteed; second, in the case of the operator Suez, losses on unpaid management fees earned before 2002; third, also in the case of Suez, losses on future management fees until 2023; fourth, losses on Claimants’ equity investments in AASA; fifth, losses on unpaid dividends.

A. Losses on Guaranteed Debt

When Argentina abolished the peg of the Argentine peso to the U.S. dollar and refused an increase in the fees and tariffs charged by AASA, AASA was unable to service its U.S. dollar denominated international loans. Claimants, as guarantors, made total payments of US$297.8 million. The Tribunal held that these were actual, liquidated losses. Following Dr. Deep, the Tribunal actualized these losses using the compounded six-month Eurodollar rate from the moment of payment.

B. Losses of Suez’s Unpaid (pre-2002) and Future Management Fees

As the concession operator, Suez claimed earned but unpaid management fees owing as of the beginning of 2002 and future management fees until 2023 as two separate elements of loss. Argentina argued that the management contract between AASA and Suez (the “Management Contract”) should not be considered an item of

loss. The Tribunal disagreed on the following grounds: the Argentine authorities knew and approved of the Management Contract; the Management Contract was not an ordinary commercial agreement, but was entered into as a result of a legal requirement that an AASA shareholder be designated as operator; and, considering the nature of the responsibilities involved, it was appropriate to compensate Suez.

By December 2001, AASA owed management fees to Suez of approximately seven million U.S. dollars. The Tribunal found that the nonpayment of these management fees was unrelated to any illegal measures taken by the Argentine government. The Tribunal concluded that a reasonable regulator would not have provided for payment of such unpaid management fees.

In relation to future management fees, the Tribunal determined that Suez’s management fees would have ranked second in AASA’s payment priorities, after payments to all of AASA’s creditors, but ahead of dividends paid to other investors. It found that AASA would not have sufficient cash flow to pay management fees until 2018. From 2018 to 2023, however, it found that AASA would have been able to pay management fees plus cumulative unpaid management fees in yearly installments.

Although the Management Contract specifically provided for a penalty interest rate in cases of delays in payment of management fees, the Tribunal decided not to award penalty interest. According to the Tribunal, Suez’s management fees were to be regarded as its return on investment and thus treated like unpaid dividends. Since interest does not normally accrue on dividends, interest should not accrue on Suez’s unpaid management fees. In addition, the Tribunal reasoned that paying interest on unpaid management fees would have been too onerous on AASA and that the principle of shared sacrifice would have led a reasonable regulator to oblige Suez to forgo interest on unpaid management fees.

Finally, the Tribunal calculated the amount of the loss of management fees in Argentine pesos, converted it into U.S. dollars using the 2001 exchange rate, and actualized it applying the semi-annually compounded Eurodollar rate. The Tribunal awarded Suez US$26.1 million for lost management fees.

C. Losses on Equity

After establishing that, as a consequence of Argentina’s actions, Claimants’ equity in AASA was worthless, the Tribunal then set out on valuing Claimants’ equity under the counterfactual “without measures” scenario.

In order to determine the “market value” of Claimants’ equity, the Tribunal used an income capitalization approach (Discounted Cash Flow). The Tribunal held that this approach was appropriate because Claimants’ equity was a share in AASA’s cash flow and AASA had had a solid record of earnings prior to 2001. The Tribunal valued AASA in 2001 using two Discounted Cash Flow methods (Adjusted Present Value and Flow to Equity) and then averaged the results.

In projecting AASA’s cash flows and asset base value until the end of the Concession in 2023, the Tribunal used the consumer price index (“CPI”). The Tribunal considered CPI more appropriate for adjusting the value of the asset base than a producer price index whose purpose is to adjust wholesale costs available to the company. In the Tribunal’s opinion, adjusting the asset base on the basis of cost-indexation would have amounted to double compensation as the periodic review of tariffs would mean tariffs were already adjusted to reflect changes in costs to the company. It held that adjusting the value of the asset base using a consumer price index would thus be the approach of a reasonable regulator.

To determine the value of Claimants’ equity, the Tribunal subtracted the value of AASA’s debt from AASA’s valuation. Finally, the Tribunal converted the value of Claimants’ equity into U.S. dollars using the 2001 exchange rate and actualized that amount resorting to the compounded semi-annual Eurodollar interest rate. The Tribunal awarded a total of US$17.5 million for the loss in value of the Claimants’ equity.

D. Losses on Unpaid Dividends

The Tribunal viewed unpaid dividends as included in the value of the shareholders’ equity and so denied recovery as it would amount to double compensation.


The Tribunal analyzed the allocation of costs from the perspective of both the 1976 UNCITRAL Arbitration Rules and the ICSID Convention regime. It acknowledged that while the ICSID Convention framework allowed it wide discretion in the allocation of costs, the 1976 UNCITRAL Arbitration Rules required that in principle the unsuccessful party bear the costs. Notwithstanding, it concluded that the circumstances of the case justified a departure from the default rule in the 1976 UNCITRAL Arbitration Rules and ordered all parties to bear their own costs and to share in the expenses of the proceedings.

The Tribunal considered that the number of complex and novel issues raised by the case merited a departure from the default rule. The Tribunal considered the fact that Claimants only prevailed in one of the three basic treaty violations they alleged, Claimants were entitled to an amount of compensation far less than originally claimed, and the case involved the discussion of novel procedural issues, such as the right of third parties to make amicus curiae submissions and the proper procedure to select and guide a Tribunal-appointed independent financial expert.


The Tribunal held that all amounts were to accrue interest at the average rate of the six-month US treasury bill, compounded semiannually. The Tribunal decided that interest should run from November 1, 2014, which was the latest date to which Claimants’ expert actualized his estimate of losses, at the request of the Tribunal after the hearing.


The Tribunal’s damages Award is noteworthy in several respects. By setting out a counterfactual “without-measures” scenario in which both sides must adjust their claims in the circumstances, it provided a flexible solution to the problem of causation, which arises when applying the general legal principles for the determination of damages to treaty claims. This is perhaps most clearly illustrated in the Tribunal’s refusal to allow punitive interest rates under the terms of the concession, which signaled the Tribunal’s focus on the injury caused to Claimants’ equity investment rather than on claims arising under a concession not held directly by Claimants. The Award also provides guidance on issues of double recovery under a certain set of facts. The Award’s use of different interest rates as between pre-Award actualization of damages and post-Award interest should be noted, and might be explained as a difference between the character of the investment and the character of the arbitration proceeding. Finally, the Award is a relatively rare instance of a Tribunal relying on an independently-appointed expert, which in future should be factored into the strategic thinking of parties to investment treaty arbitrations.