On January 25, 2018, Argentinian President Mauricio Macri held a press conference announcing that after discussions with French President Emmanuel Macron, Argentina had agreed to settle a 2015 investor-state arbitration award in favor of Suez S.A. that it had previously failed to pay.

This was a continuation of what appeared to be President Macri’s commitment to restoring Argentina’s economic reputation, and to put the series of investor-state cases arising out of its 1998-2002 economic crisis firmly in the rear-view mirror. However, recent developments in the Suez settlement process may give international investors pause. More than one year after President Macri’s promise to pay Suez, Argentina’s commitment remains unfulfilled, which may force Suez to attempt to enforce the award in US courts.

The History of Investor-State Awards against Argentina

Twenty years ago Argentina confronted an economic recession that led its government to impose emergency regulatory measures in an effort to stabilize its economy and defuse social tensions. Such measures included reversing a policy that had pegged the Argentine peso to the U.S. dollar at a fixed exchange rate to let the peso float freely, and imposing price controls on services.[1] The change in policy resulted in both currency and debt crises shortly after adoption, with the value of the peso plummeting and Argentina defaulting on most of its USD 141 billion in public debt.[2]

Argentina’s regulatory reaction to its economic crisis breached commitments made to foreign investors, who were protected in many cases by bilateral or multilateral investment treaties (“BITs”). Thus, Argentina's actions triggered the first major wave of arbitrations under BITs.[3] Investors brought more than 50 international arbitration claims against Argentina,[4] which to this day has appeared before the International Centre for Settlement of Investment Disputes (“ICSID”) more than any other State. [5] Indeed, the US-Argentina BIT is the most relied upon BIT in ICSID’s history.[6]

While Argentina settled many of these cases, at least 15 ended with awards against Argentina in favor of one or more investors, in a total principal amount of USD 1.9 billion and hundreds of millions more in accrued interest.[7] For many years, Argentina ignored its international legal obligations and refused to satisfy the majority of these awards.

Argentina Begins to Satisfy Investor-State Awards

In October 2013, the Argentine government, seeking to return to international financial debt markets,[8] settled five outstanding investment treaty arbitration claims by agreeing to pay a total of USD 677 million to Azurix, CMS, Continental Casualty, National Grid and Vivendi.[9] In 2014, Argentina additionally paid USD 5 billion to settle a claim brought by Repsol for the expropriation of Repsol’s subsidiary in Argentina (although this expropriation had occurred in 2012, long after the crisis that led to most investor-state awards against Argentina).[10]

The government of President Macri, who came to power in 2015, continued this trend. Under his administration, Argentina settled four outstanding international debts and claims, including a settlement with the Italian bond-holders that had brought claims against Argentina under the ICSID Convention for USD 1.35 billion[11] and a settlement agreement for USD 253 million with other bond holders.[12] In 2017, Macri’s government further agreed to pay EDF International S.A. USD 136 million to honor an ICSID award rendered in favor of the French energy company for Argentina’s breach of its obligations under a distribution agreement.[13]

One of the remaining awards known to be unpaid was addressed at President Macri’s January 25 press conference, in which he announced that Argentina had reached a settlement agreement with French water company Suez S.A. to pay USD 305 million in satisfaction of an ICSID award.[14]

Going in Reverse?

Unfortunately, over a year after President Macri’s press conference, Argentina’s commitment to settle the Suez award—and its obligations to foreign investors in general—is not yet fulfilled. This undermines the credibility of Argentina’s public commitments to Suez and President Macron, as well as those made in settlements with other award creditors that have been announced, but which have not yet been fulfilled.

More importantly, this conduct raises questions about whether President Macri’s administration has the political will necessary to follow through on its obligations to international investors and put the country on the path to economic stability.