TSA Spectrum de Argentina S.A. v Argentine Republic: an ICSID tribunal refused jurisdiction of a claim brought under the Netherlands-Argentina Bilateral Investment Treaty (BIT). It decided to pierce the corporate veil to find that the test for an investor's nationality was not satisfied, a decision which may well have wide-reaching implications for investors who often structure investments through Netherlands vehicles in order to avail themselves of the generous protection afforded to investors by Netherlands BITs.

Summary and business impacts

Jurisdiction of the International Centre for the Settlement of Investment Disputes (ICSID) is limited to disputes between a Contracting State and a "national" of another Contracting State. The ICSID Convention (at Article 25(2)(b)) provides an exception to this rule where, "because of foreign control", Contracting States have agreed to treat a particular legal person as a national of another Contracting State. The Netherlands and Argentina have made such an agreement in their BIT.

On 19 December 2008, an ICSID tribunal rejected TSA's claim that it qualified as a Netherlands national and could therefore take the benefit of the protections in the Netherlands-Argentina BIT. Despite the fact that TSA met the criteria for foreign control specified by the BIT, the Tribunal held that the Convention sets an independent objective standard of "foreign control". The Tribunal was not satisfied that TSA (a company incorporated in Argentina but wholly owned by a Netherlands entity) was under foreign control for the purposes of the Convention, because it was ultimately owned by a German-Argentine citizen.

This decision is significant as it signals a departure from the generous approach to establishing nationality taken by previous tribunals and their reluctance to trace ultimate ownership of investments (as exemplified by Tokios Tokelés v Ukraine and AdT v Bolivia).

Factual background

TSA won a concession contract with Argentina's Telecommunications Commission to manage Argentina's radio spectrum in return for a share of monthly tariffs. A dispute arose when the Commission terminated the concession contract alleging breaches by TSA. In response, TSA initiated ICSID proceedings against Argentina in December 2004 claiming breaches of the BIT and arguing that it fell within the exception provided by Article 25(2)(b) of the Convention allowing companies to claim against the Contracting State in which they are incorporated.

Tribunal's findings

The Tribunal accepted Argentina's arguments that TSI (the Netherlands subsidiary) was a "vehicle company used by the true controller of TSA to carry out their investment" and that "only a genuine foreign investment should be protected by the ICSID mechanism". Factors evidencing that TSI was a corporate vehicle without real control included:

  1. lack of Netherlands citizens on its board of directors;
  2. its incorporation in Argentina; and
  3. doubts about whether it carried out any corporate activities.  

Ultimately, it held that parties' agreements in their BITs regarding foreign control were not conclusive. As an affiliate of a Netherlands entity, TSA satisfied the test of foreign control contained within the BIT. However, the Tribunal decided to pierce the corporate veil further and traced ultimate ownership of TSA to an Argentine national. TSA therefore failed to satisfy the ICSID Convention's nationality test required to bring the BIT claim.


Following this decision, investors may wish to reconsider the ways in which they structure their investments. If this Tribunal's interpretation of the Convention is followed, the precise provisions of a BIT will become of less importance. Rather it is the Convention which defines the "outer limits" of ICSID's jurisdiction and "which cannot be extended or derogated from even by agreement of the Parties". Therefore, investors may rely less on the liberal wording of the Netherlands BITs as regards "foreign control".

Alternatively, investors may in the future be more inclined to bring disputes under the UNCITRAL Rules, where this mechanism is available to them (as it is under most BITs). Since these Rules are not drafted specifically with investment treaty arbitration in mind, they do not include any specific limitations in respect of nationality. Therefore the provisions of the BIT in this regard would be interpreted independently

Nonetheless, there is no system of precedent as such within international arbitration. This decision, which included a strong dissenting opinion, emphasises the ongoing disagreement amongst arbitrators over the interpretation of nationality under the Convention. It remains to be seen whether future tribunals will adopt this tribunal's approach.